Correlation Between AF Gruppen and American Shipping

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

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

Diversification Opportunities for AF Gruppen and American Shipping

-0.06

Correlation Coefficient

AF Gruppen  American Shipping

Good diversification

The 3 months correlation between AFG and American is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding AF Gruppen ASA and American Shipping in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Shipping and AF Gruppen 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 AF Gruppen ASA are associated (or correlated) with American Shipping. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Shipping has no effect on the direction of AF Gruppen i.e., AF Gruppen and American Shipping go up and down completely randomly.

Pair Corralation between AF Gruppen and American Shipping

Assuming the 90 days trading horizon AF Gruppen ASA is expected to generate 0.92 times more return on investment than American Shipping. However, AF Gruppen ASA is 1.08 times less risky than American Shipping. It trades about 0.25 of its potential returns per unit of risk. American Shipping is currently generating about -0.22 per unit of risk. If you would invest  13,820  in AF Gruppen ASA on September 25, 2024 and sell it today you would earn a total of  820.00  from holding AF Gruppen ASA or generate 5.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

AF Gruppen ASA  vs.  American Shipping

AF Gruppen ASA

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in AF Gruppen ASA are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting technical and fundamental indicators, AF Gruppen disclosed solid returns over the last few months and may actually be approaching a breakup point.

American Shipping

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Shipping has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, American Shipping is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with AF Gruppen and American Shipping

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

The idea behind AF Gruppen ASA and American Shipping 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.