Correlation Between First Ship and Deluxe

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

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

Diversification Opportunities for First Ship and Deluxe

0.0

Correlation Coefficient

First Ship  Deluxe

Pay attention - limited upside

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

Pair Corralation between First Ship and Deluxe

Assuming the 90 days horizon First Ship Lease is expected to generate 1.39 times more return on investment than Deluxe. However, First Ship is 1.39 times more volatile than Deluxe. It trades about 0.05 of its potential returns per unit of risk. Deluxe is currently generating about 0.06 per unit of risk. If you would invest  2.50  in First Ship Lease on September 13, 2024 and sell it today you would earn a total of  1.50  from holding First Ship Lease or generate 60.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.72%
Values	Daily Returns

First Ship Lease  vs.  Deluxe

First Ship Lease

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Ship Lease has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, First Ship is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Deluxe

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Deluxe are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating essential indicators, Deluxe showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Ship and Deluxe

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

The idea behind First Ship Lease and Deluxe 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.

Check out your portfolio center.

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.