Correlation Between First Ship and HE Equipment

Can any of the company-specific risk be diversified away by investing in both First Ship and HE Equipment 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 HE Equipment 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 HE Equipment Services, you can compare the effects of market volatilities on First Ship and HE Equipment 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 HE Equipment. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Ship and HE Equipment.

Diversification Opportunities for First Ship and HE Equipment

0.0

Correlation Coefficient

First Ship  HE Equipment

Pay attention - limited upside

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

Pair Corralation between First Ship and HE Equipment

If you would invest  4,342  in HE Equipment Services on September 13, 2024 and sell it today you would earn a total of  1,329  from holding HE Equipment Services or generate 30.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

First Ship Lease  vs.  HE Equipment Services

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.

HE Equipment Services

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in HE Equipment Services are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, HE Equipment unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Ship and HE Equipment

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

The idea behind First Ship Lease and HE Equipment Services 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.