Correlation Between Nordic American and Genco Shipping

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

Diversification Opportunities for Nordic American and Genco Shipping

0.55

Correlation Coefficient

Nordic American  Genco Shipping

Very weak diversification

The 3 months correlation between Nordic and Genco is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Nordic American Tankers and Genco Shipping Trading in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Genco Shipping Trading 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 Genco Shipping. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Genco Shipping Trading has no effect on the direction of Nordic American i.e., Nordic American and Genco Shipping go up and down completely randomly.

Pair Corralation between Nordic American and Genco Shipping

Considering the 90-day investment horizon Nordic American Tankers is expected to generate 1.17 times more return on investment than Genco Shipping. However, Nordic American is 1.17 times more volatile than Genco Shipping Trading. It trades about -0.03 of its potential returns per unit of risk. Genco Shipping Trading is currently generating about -0.06 per unit of risk. If you would invest  260.00  in Nordic American Tankers on December 2, 2024 and sell it today you would lose (15.00) from holding Nordic American Tankers or give up 5.77% of portfolio value over 90 days.

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

Nordic American Tankers  vs.  Genco Shipping Trading

Nordic American Tankers

Risk-Adjusted Performance

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 comparatively stable basic indicators, Nordic American is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Genco Shipping Trading

Risk-Adjusted Performance

Very Weak

Over the last 90 days Genco Shipping Trading has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Nordic American and Genco Shipping

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

The idea behind Nordic American Tankers and Genco Shipping Trading 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.