Correlation Between Nordic American and Global Partners

Can any of the company-specific risk be diversified away by investing in both Nordic American and Global Partners 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 Global Partners 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 Global Partners LP, you can compare the effects of market volatilities on Nordic American and Global Partners 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 Global Partners. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nordic American and Global Partners.

Diversification Opportunities for Nordic American and Global Partners

0.05

Correlation Coefficient

Nordic American  Global Partners

Significant diversification

The 3 months correlation between Nordic and Global is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Nordic American Tankers and Global Partners LP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Partners LP 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 Global Partners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Partners LP has no effect on the direction of Nordic American i.e., Nordic American and Global Partners go up and down completely randomly.

Pair Corralation between Nordic American and Global Partners

Considering the 90-day investment horizon Nordic American is expected to generate 1.79 times less return on investment than Global Partners. But when comparing it to its historical volatility, Nordic American Tankers is 1.06 times less risky than Global Partners. It trades about 0.06 of its potential returns per unit of risk. Global Partners LP is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  4,749  in Global Partners LP on December 27, 2024 and sell it today you would earn a total of  596.00  from holding Global Partners LP or generate 12.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Nordic American Tankers  vs.  Global Partners LP

Nordic American Tankers

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nordic American Tankers are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, Nordic American may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Global Partners LP

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Global Partners LP are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak essential indicators, Global Partners reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nordic American and Global Partners

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

The idea behind Nordic American Tankers and Global Partners LP 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.