Correlation Between Stolt Nielsen and Nordic American

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

Diversification Opportunities for Stolt Nielsen and Nordic American

0.88
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Stolt and Nordic is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Stolt Nielsen Limited and Nordic American Tankers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nordic American Tankers 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 Nordic American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nordic American Tankers has no effect on the direction of Stolt Nielsen i.e., Stolt Nielsen and Nordic American go up and down completely randomly.

Pair Corralation between Stolt Nielsen and Nordic American

Assuming the 90 days horizon Stolt Nielsen Limited is expected to generate 2.79 times more return on investment than Nordic American. However, Stolt Nielsen is 2.79 times more volatile than Nordic American Tankers. It trades about 0.03 of its potential returns per unit of risk. Nordic American Tankers is currently generating about 0.02 per unit of risk. If you would invest  2,606  in Stolt Nielsen Limited on October 10, 2024 and sell it today you would lose (87.00) from holding Stolt Nielsen Limited or give up 3.34% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy70.51%
ValuesDaily Returns

Stolt Nielsen Limited  vs.  Nordic American Tankers

 Performance 
       Timeline  
Stolt Nielsen Limited 

Risk-Adjusted Performance

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Weak
 
Strong
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 weak performance in the last few months, the Stock's technical and fundamental indicators 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.
Nordic American Tankers 

Risk-Adjusted Performance

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Weak
 
Strong
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 February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Stolt Nielsen and Nordic American Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Stolt Nielsen and Nordic American

The main advantage of trading using opposite Stolt Nielsen and Nordic American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stolt Nielsen position performs unexpectedly, Nordic American 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 Nordic American will offset losses from the drop in Nordic American's long position.
The idea behind Stolt Nielsen Limited and Nordic American Tankers 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.

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