Correlation Between AP Moeller and GSE Systems

Can any of the company-specific risk be diversified away by investing in both AP Moeller and GSE Systems at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining AP Moeller and GSE Systems into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between AP Moeller Maersk AS and GSE Systems, you can compare the effects of market volatilities on AP Moeller and GSE Systems and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in AP Moeller with a short position of GSE Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of AP Moeller and GSE Systems.

Diversification Opportunities for AP Moeller and GSE Systems

0.61

Correlation Coefficient

AP Moeller  GSE Systems

Poor diversification

The 3 months correlation between AMKBY and GSE is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding AP Moeller Maersk AS and GSE Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GSE Systems and AP Moeller is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on AP Moeller Maersk AS are associated (or correlated) with GSE Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GSE Systems has no effect on the direction of AP Moeller i.e., AP Moeller and GSE Systems go up and down completely randomly.

Pair Corralation between AP Moeller and GSE Systems

If you would invest  778.00  in AP Moeller Maersk AS on September 12, 2024 and sell it today you would earn a total of  67.00  from holding AP Moeller Maersk AS or generate 8.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	4.76%
Values	Daily Returns

AP Moeller Maersk AS  vs.  GSE Systems

AP Moeller Maersk

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AP Moeller Maersk AS are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile fundamental drivers, AP Moeller showed solid returns over the last few months and may actually be approaching a breakup point.

GSE Systems

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days GSE Systems has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively fragile basic indicators, GSE Systems reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AP Moeller and GSE Systems

The main advantage of trading using opposite AP Moeller and GSE Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AP Moeller position performs unexpectedly, GSE Systems can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in GSE Systems will offset losses from the drop in GSE Systems' long position.

The idea behind AP Moeller Maersk AS and GSE Systems pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.