Correlation Between Torm PLC and Pyxis Tankers

Can any of the company-specific risk be diversified away by investing in both Torm PLC and Pyxis Tankers 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 Torm PLC and Pyxis Tankers into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Torm PLC and Pyxis Tankers

0.73

Correlation Coefficient

Torm PLC  Pyxis Tankers

Poor diversification

The 3 months correlation between Torm and Pyxis is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Torm PLC Class and Pyxis Tankers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pyxis Tankers and Torm PLC 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 Torm PLC Class are associated (or correlated) with Pyxis Tankers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pyxis Tankers has no effect on the direction of Torm PLC i.e., Torm PLC and Pyxis Tankers go up and down completely randomly.

Pair Corralation between Torm PLC and Pyxis Tankers

Given the investment horizon of 90 days Torm PLC Class is expected to under-perform the Pyxis Tankers. But the stock apears to be less risky and, when comparing its historical volatility, Torm PLC Class is 9.01 times less risky than Pyxis Tankers. The stock trades about -0.09 of its potential returns per unit of risk. The Pyxis Tankers is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  25.00  in Pyxis Tankers on October 1, 2024 and sell it today you would lose (5.00) from holding Pyxis Tankers or give up 20.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	90.0%
Values	Daily Returns

Torm PLC Class  vs.  Pyxis Tankers

Torm PLC Class

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Torm PLC Class 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 primary indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pyxis Tankers

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pyxis Tankers has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Torm PLC and Pyxis Tankers

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

The idea behind Torm PLC Class and Pyxis 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.