Correlation Between Pacific Basin and American Shipping

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

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

Diversification Opportunities for Pacific Basin and American Shipping

0.0

Correlation Coefficient

Pacific Basin  American Shipping

Pay attention - limited upside

The 3 months correlation between Pacific and American is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Pacific Basin Shipping and American Shipping in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Shipping and Pacific Basin 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 Pacific Basin Shipping are associated (or correlated) with American Shipping. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Shipping has no effect on the direction of Pacific Basin i.e., Pacific Basin and American Shipping go up and down completely randomly.

Pair Corralation between Pacific Basin and American Shipping

If you would invest  0.00  in Pacific Basin Shipping on October 8, 2024 and sell it today you would earn a total of  0.00  from holding Pacific Basin Shipping or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	2.63%
Values	Daily Returns

Pacific Basin Shipping  vs.  American Shipping

Pacific Basin Shipping

Risk-Adjusted Performance

0 of 100

Very Weak

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

American Shipping

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in American Shipping are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, American Shipping reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pacific Basin and American Shipping

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

The idea behind Pacific Basin Shipping and American Shipping 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.

Check out your portfolio center.

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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.