Correlation Between Nordic American and AP Moeller

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

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

Diversification Opportunities for Nordic American and AP Moeller

-0.56

Correlation Coefficient

Nordic American  AP Moeller

Excellent diversification

The 3 months correlation between Nordic and AMKAF is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Nordic American Tankers and AP Moeller in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AP Moeller and Nordic American 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 Nordic American Tankers are associated (or correlated) with AP Moeller. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AP Moeller has no effect on the direction of Nordic American i.e., Nordic American and AP Moeller go up and down completely randomly.

Pair Corralation between Nordic American and AP Moeller

Considering the 90-day investment horizon Nordic American Tankers is expected to under-perform the AP Moeller. But the stock apears to be less risky and, when comparing its historical volatility, Nordic American Tankers is 1.3 times less risky than AP Moeller. The stock trades about -0.24 of its potential returns per unit of risk. The AP Moeller is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  155,919  in AP Moeller on September 27, 2024 and sell it today you would lose (2,992) from holding AP Moeller or give up 1.92% of portfolio value over 90 days.

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

Nordic American Tankers  vs.  AP Moeller

Nordic American Tankers

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nordic American Tankers has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

AP Moeller

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Nordic American and AP Moeller

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

The idea behind Nordic American Tankers and AP Moeller 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.