Correlation Between Pacific Basin and Kawasaki Kisen

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

Diversification Opportunities for Pacific Basin and Kawasaki Kisen

0.62

Correlation Coefficient

Pacific Basin  Kawasaki Kisen

Poor diversification

The 3 months correlation between Pacific and Kawasaki is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Pacific Basin Shipping and Kawasaki Kisen Kaisha in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kawasaki Kisen Kaisha 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 Kawasaki Kisen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kawasaki Kisen Kaisha has no effect on the direction of Pacific Basin i.e., Pacific Basin and Kawasaki Kisen go up and down completely randomly.

Pair Corralation between Pacific Basin and Kawasaki Kisen

Assuming the 90 days horizon Pacific Basin Shipping is expected to generate 4.58 times more return on investment than Kawasaki Kisen. However, Pacific Basin is 4.58 times more volatile than Kawasaki Kisen Kaisha. It trades about 0.04 of its potential returns per unit of risk. Kawasaki Kisen Kaisha is currently generating about -0.24 per unit of risk. If you would invest  420.00  in Pacific Basin Shipping on October 24, 2024 and sell it today you would earn a total of  6.00  from holding Pacific Basin Shipping or generate 1.43% 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.  Kawasaki Kisen Kaisha

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. In spite of weak performance in the last few months, the Stock's fundamental drivers remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Kawasaki Kisen Kaisha

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kawasaki Kisen Kaisha has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's forward-looking signals remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Pacific Basin and Kawasaki Kisen

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

The idea behind Pacific Basin Shipping and Kawasaki Kisen Kaisha 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.