Correlation Between American Shipping and Stolt Nielsen

Can any of the company-specific risk be diversified away by investing in both American Shipping and Stolt Nielsen 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 American Shipping and Stolt Nielsen into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between American Shipping and Stolt Nielsen Limited, you can compare the effects of market volatilities on American Shipping and Stolt Nielsen 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 American Shipping with a short position of Stolt Nielsen. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Shipping and Stolt Nielsen.

Diversification Opportunities for American Shipping and Stolt Nielsen

-0.27

Correlation Coefficient

American Shipping  Stolt Nielsen

Very good diversification

The 3 months correlation between American and Stolt is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding American Shipping and Stolt Nielsen Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stolt Nielsen Limited and American Shipping 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 American Shipping are associated (or correlated) with Stolt Nielsen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stolt Nielsen Limited has no effect on the direction of American Shipping i.e., American Shipping and Stolt Nielsen go up and down completely randomly.

Pair Corralation between American Shipping and Stolt Nielsen

Assuming the 90 days trading horizon American Shipping is expected to generate 0.95 times more return on investment than Stolt Nielsen. However, American Shipping is 1.06 times less risky than Stolt Nielsen. It trades about 0.14 of its potential returns per unit of risk. Stolt Nielsen Limited is currently generating about -0.07 per unit of risk. If you would invest  2,270  in American Shipping on December 30, 2024 and sell it today you would earn a total of  500.00  from holding American Shipping or generate 22.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

American Shipping  vs.  Stolt Nielsen Limited

American Shipping

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in American Shipping are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, American Shipping disclosed solid returns over the last few months and may actually be approaching a breakup point.

Stolt Nielsen Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Stolt Nielsen Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's forward indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with American Shipping and Stolt Nielsen

The main advantage of trading using opposite American Shipping and Stolt Nielsen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Shipping position performs unexpectedly, Stolt Nielsen 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 Stolt Nielsen will offset losses from the drop in Stolt Nielsen's long position.

The idea behind American Shipping and Stolt Nielsen Limited 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.