Correlation Between Global Ship and Peabody Energy

Can any of the company-specific risk be diversified away by investing in both Global Ship and Peabody Energy 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 Global Ship and Peabody Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Global Ship Lease and Peabody Energy, you can compare the effects of market volatilities on Global Ship and Peabody Energy 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 Global Ship with a short position of Peabody Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Ship and Peabody Energy.

Diversification Opportunities for Global Ship and Peabody Energy

0.46

Correlation Coefficient

Global Ship  Peabody Energy

Very weak diversification

The 3 months correlation between Global and Peabody is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Global Ship Lease and Peabody Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Peabody Energy and Global Ship 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 Global Ship Lease are associated (or correlated) with Peabody Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Peabody Energy has no effect on the direction of Global Ship i.e., Global Ship and Peabody Energy go up and down completely randomly.

Pair Corralation between Global Ship and Peabody Energy

Assuming the 90 days horizon Global Ship Lease is expected to under-perform the Peabody Energy. But the stock apears to be less risky and, when comparing its historical volatility, Global Ship Lease is 1.34 times less risky than Peabody Energy. The stock trades about -0.09 of its potential returns per unit of risk. The Peabody Energy is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  2,207  in Peabody Energy on September 29, 2024 and sell it today you would lose (319.00) from holding Peabody Energy or give up 14.45% of portfolio value over 90 days.

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

Global Ship Lease  vs.  Peabody Energy

Global Ship Lease

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global Ship Lease has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Peabody Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Peabody Energy 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 basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Global Ship and Peabody Energy

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

The idea behind Global Ship Lease and Peabody Energy 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.