Correlation Between Nordic American and Golden Ocean

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

Diversification Opportunities for Nordic American and Golden Ocean

0.75

Correlation Coefficient

Nordic American  Golden Ocean

Poor diversification

The 3 months correlation between Nordic and Golden is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Nordic American Tankers and Golden Ocean Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Golden Ocean Group 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 Golden Ocean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Golden Ocean Group has no effect on the direction of Nordic American i.e., Nordic American and Golden Ocean go up and down completely randomly.

Pair Corralation between Nordic American and Golden Ocean

Considering the 90-day investment horizon Nordic American Tankers is expected to under-perform the Golden Ocean. But the stock apears to be less risky and, when comparing its historical volatility, Nordic American Tankers is 1.12 times less risky than Golden Ocean. The stock trades about -0.2 of its potential returns per unit of risk. The Golden Ocean Group is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest  1,147  in Golden Ocean Group on September 12, 2024 and sell it today you would lose (202.00) from holding Golden Ocean Group or give up 17.61% of portfolio value over 90 days.

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

Nordic American Tankers  vs.  Golden Ocean Group

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.

Golden Ocean Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Golden Ocean Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's technical and fundamental indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Nordic American and Golden Ocean

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

The idea behind Nordic American Tankers and Golden Ocean Group 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.