Correlation Between Stolt Nielsen and American Shipping

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

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

Diversification Opportunities for Stolt Nielsen and American Shipping

-0.27

Correlation Coefficient

Stolt Nielsen  American Shipping

Very good diversification

The 3 months correlation between Stolt and American is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Stolt Nielsen Limited and American Shipping in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Shipping and Stolt Nielsen 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 Stolt Nielsen Limited 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 Stolt Nielsen i.e., Stolt Nielsen and American Shipping go up and down completely randomly.

Pair Corralation between Stolt Nielsen and American Shipping

Assuming the 90 days trading horizon Stolt Nielsen Limited is expected to under-perform the American Shipping. But the stock apears to be less risky and, when comparing its historical volatility, Stolt Nielsen Limited is 1.06 times less risky than American Shipping. The stock trades about -0.31 of its potential returns per unit of risk. The American Shipping is currently generating about -0.18 of returns per unit of risk over similar time horizon. If you would invest  2,706  in American Shipping on December 2, 2024 and sell it today you would lose (171.00) from holding American Shipping or give up 6.32% of portfolio value over 90 days.

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

Stolt Nielsen Limited  vs.  American Shipping

Stolt Nielsen Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Stolt Nielsen Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward indicators, Stolt Nielsen is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

American Shipping

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in American Shipping are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, American Shipping may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Stolt Nielsen and American Shipping

The main advantage of trading using opposite Stolt Nielsen and American Shipping positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stolt Nielsen 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 Stolt Nielsen Limited 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.

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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.