Correlation Between Dampskibsselskabet and American Shipping

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

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

Diversification Opportunities for Dampskibsselskabet and American Shipping

-0.41

Correlation Coefficient

Dampskibsselskabet  American Shipping

Very good diversification

The 3 months correlation between Dampskibsselskabet and American is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Dampskibsselskabet Norden AS and American Shipping in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Shipping and Dampskibsselskabet 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 Dampskibsselskabet Norden AS are associated (or correlated) with American Shipping. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Shipping has no effect on the direction of Dampskibsselskabet i.e., Dampskibsselskabet and American Shipping go up and down completely randomly.

Pair Corralation between Dampskibsselskabet and American Shipping

Assuming the 90 days trading horizon Dampskibsselskabet Norden AS is expected to under-perform the American Shipping. But the stock apears to be less risky and, when comparing its historical volatility, Dampskibsselskabet Norden AS is 1.08 times less risky than American Shipping. The stock trades about -0.14 of its potential returns per unit of risk. The American Shipping is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  2,700  in American Shipping on September 12, 2024 and sell it today you would earn a total of  20.00  from holding American Shipping or generate 0.74% return on investment over 90 days.

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

Dampskibsselskabet Norden AS  vs.  American Shipping

Dampskibsselskabet

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dampskibsselskabet Norden AS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

American Shipping

Risk-Adjusted Performance

1 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in American Shipping are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, American Shipping is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Dampskibsselskabet and American Shipping

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

The idea behind Dampskibsselskabet Norden AS and American Shipping 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.