Correlation Between United Maritime and Torm PLC

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Can any of the company-specific risk be diversified away by investing in both United Maritime and Torm PLC 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 United Maritime and Torm PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Maritime and Torm PLC Class, you can compare the effects of market volatilities on United Maritime and Torm PLC 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 United Maritime with a short position of Torm PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Maritime and Torm PLC.

Diversification Opportunities for United Maritime and Torm PLC

0.94
  Correlation Coefficient

Almost no diversification

The 3 months correlation between United and Torm is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding United Maritime and Torm PLC Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Torm PLC Class and United Maritime 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 United Maritime are associated (or correlated) with Torm PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Torm PLC Class has no effect on the direction of United Maritime i.e., United Maritime and Torm PLC go up and down completely randomly.

Pair Corralation between United Maritime and Torm PLC

Given the investment horizon of 90 days United Maritime is expected to under-perform the Torm PLC. But the stock apears to be less risky and, when comparing its historical volatility, United Maritime is 1.09 times less risky than Torm PLC. The stock trades about -0.02 of its potential returns per unit of risk. The Torm PLC Class is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,712  in Torm PLC Class on October 3, 2024 and sell it today you would earn a total of  233.00  from holding Torm PLC Class or generate 13.61% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy99.8%
ValuesDaily Returns

United Maritime  vs.  Torm PLC Class

 Performance 
       Timeline  
United Maritime 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days United Maritime has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's technical and fundamental indicators remain somewhat 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.
Torm PLC Class 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 unsteady performance in the last few months, the Stock's primary indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

United Maritime and Torm PLC Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with United Maritime and Torm PLC

The main advantage of trading using opposite United Maritime and Torm PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Maritime position performs unexpectedly, Torm PLC 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 Torm PLC will offset losses from the drop in Torm PLC's long position.
The idea behind United Maritime and Torm PLC Class 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.

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