Correlation Between TOP Ships and Nordic American

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

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

Diversification Opportunities for TOP Ships and Nordic American

0.52

Correlation Coefficient

TOP Ships  Nordic American

Very weak diversification

The 3 months correlation between TOP and Nordic is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding TOP Ships 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 TOP Ships 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 TOP Ships 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 TOP Ships i.e., TOP Ships and Nordic American go up and down completely randomly.

Pair Corralation between TOP Ships and Nordic American

Given the investment horizon of 90 days TOP Ships is expected to generate 1.08 times more return on investment than Nordic American. However, TOP Ships is 1.08 times more volatile than Nordic American Tankers. It trades about 0.05 of its potential returns per unit of risk. Nordic American Tankers is currently generating about 0.04 per unit of risk. If you would invest  611.00  in TOP Ships on December 26, 2024 and sell it today you would earn a total of  32.00  from holding TOP Ships or generate 5.24% return on investment over 90 days.

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

TOP Ships  vs.  Nordic American Tankers

TOP Ships

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in TOP Ships are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, TOP Ships may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Nordic American Tankers

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nordic American Tankers are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Nordic American is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with TOP Ships and Nordic American

The main advantage of trading using opposite TOP Ships and Nordic American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TOP Ships 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 TOP Ships 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.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.