Correlation Between MPC Container and Stolt Nielsen

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Can any of the company-specific risk be diversified away by investing in both MPC Container 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 MPC Container and Stolt Nielsen into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MPC Container Ships and Stolt Nielsen Limited, you can compare the effects of market volatilities on MPC Container 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 MPC Container with a short position of Stolt Nielsen. Check out your portfolio center. Please also check ongoing floating volatility patterns of MPC Container and Stolt Nielsen.

Diversification Opportunities for MPC Container and Stolt Nielsen

0.27
  Correlation Coefficient

Modest diversification

The 3 months correlation between MPC and Stolt is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding MPC Container Ships 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 MPC Container 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 MPC Container Ships 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 MPC Container i.e., MPC Container and Stolt Nielsen go up and down completely randomly.

Pair Corralation between MPC Container and Stolt Nielsen

Assuming the 90 days horizon MPC Container Ships is expected to under-perform the Stolt Nielsen. But the pink sheet apears to be less risky and, when comparing its historical volatility, MPC Container Ships is 1.54 times less risky than Stolt Nielsen. The pink sheet trades about -0.12 of its potential returns per unit of risk. The Stolt Nielsen Limited is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  3,014  in Stolt Nielsen Limited on October 25, 2024 and sell it today you would lose (419.00) from holding Stolt Nielsen Limited or give up 13.9% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

MPC Container Ships  vs.  Stolt Nielsen Limited

 Performance 
       Timeline  
MPC Container Ships 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days MPC Container Ships has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.
Stolt Nielsen Limited 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 weak performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

MPC Container and Stolt Nielsen Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with MPC Container and Stolt Nielsen

The main advantage of trading using opposite MPC Container and Stolt Nielsen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MPC Container 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 MPC Container Ships 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.

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