Correlation Between East Africa and Global Ship

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

By analyzing existing cross correlation between East Africa Metals and Global Ship Lease, you can compare the effects of market volatilities on East Africa and Global Ship 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 East Africa with a short position of Global Ship. Check out your portfolio center. Please also check ongoing floating volatility patterns of East Africa and Global Ship.

Diversification Opportunities for East Africa and Global Ship

0.0

Correlation Coefficient

East Africa  Global Ship

Pay attention - limited upside

The 3 months correlation between East and Global is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding East Africa Metals and Global Ship Lease in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Ship Lease and East Africa 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 East Africa Metals are associated (or correlated) with Global Ship. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Ship Lease has no effect on the direction of East Africa i.e., East Africa and Global Ship go up and down completely randomly.

Pair Corralation between East Africa and Global Ship

Assuming the 90 days horizon East Africa Metals is expected to generate 83.52 times more return on investment than Global Ship. However, East Africa is 83.52 times more volatile than Global Ship Lease. It trades about 0.09 of its potential returns per unit of risk. Global Ship Lease is currently generating about 0.06 per unit of risk. If you would invest  9.15  in East Africa Metals on September 26, 2024 and sell it today you would earn a total of  1.85  from holding East Africa Metals or generate 20.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.79%
Values	Daily Returns

East Africa Metals  vs.  Global Ship Lease

East Africa Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days East Africa Metals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's primary indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Global Ship Lease

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Global Ship Lease are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong essential indicators, Global Ship is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with East Africa and Global Ship

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

The idea behind East Africa Metals and Global Ship Lease 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.