Correlation Between Pacific Basin and Global Ship

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

Diversification Opportunities for Pacific Basin and Global Ship

0.6

Correlation Coefficient

Pacific Basin  Global Ship

Poor diversification

The 3 months correlation between Pacific and Global is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Pacific Basin Shipping and Global Ship Lease in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Ship Lease 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 Global Ship. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Ship Lease has no effect on the direction of Pacific Basin i.e., Pacific Basin and Global Ship go up and down completely randomly.

Pair Corralation between Pacific Basin and Global Ship

Assuming the 90 days horizon Pacific Basin Shipping is expected to under-perform the Global Ship. But the pink sheet apears to be less risky and, when comparing its historical volatility, Pacific Basin Shipping is 1.33 times less risky than Global Ship. The pink sheet trades about -0.24 of its potential returns per unit of risk. The Global Ship Lease is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  2,128  in Global Ship Lease on October 15, 2024 and sell it today you would earn a total of  76.00  from holding Global Ship Lease or generate 3.57% return on investment over 90 days.

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

Pacific Basin Shipping  vs.  Global Ship Lease

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 fragile performance in the last few months, the Stock's fundamental drivers remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Global Ship Lease

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global Ship Lease has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady 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 Pacific Basin and Global Ship

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

The idea behind Pacific Basin Shipping and Global Ship Lease 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.