Correlation Between Armada Hflr and Pacific Basin

Can any of the company-specific risk be diversified away by investing in both Armada Hflr and Pacific Basin 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 Armada Hflr and Pacific Basin into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Armada Hflr Pr and Pacific Basin Shipping, you can compare the effects of market volatilities on Armada Hflr and Pacific Basin 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 Armada Hflr with a short position of Pacific Basin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Armada Hflr and Pacific Basin.

Diversification Opportunities for Armada Hflr and Pacific Basin

0.19

Correlation Coefficient

Armada Hflr  Pacific Basin

Average diversification

The 3 months correlation between Armada and Pacific is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Armada Hflr Pr and Pacific Basin Shipping in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacific Basin Shipping and Armada Hflr 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 Armada Hflr Pr are associated (or correlated) with Pacific Basin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacific Basin Shipping has no effect on the direction of Armada Hflr i.e., Armada Hflr and Pacific Basin go up and down completely randomly.

Pair Corralation between Armada Hflr and Pacific Basin

Considering the 90-day investment horizon Armada Hflr is expected to generate 17.93 times less return on investment than Pacific Basin. But when comparing it to its historical volatility, Armada Hflr Pr is 2.93 times less risky than Pacific Basin. It trades about 0.01 of its potential returns per unit of risk. Pacific Basin Shipping is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  9.09  in Pacific Basin Shipping on September 23, 2024 and sell it today you would earn a total of  8.91  from holding Pacific Basin Shipping or generate 98.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.03%
Values	Daily Returns

Armada Hflr Pr  vs.  Pacific Basin Shipping

Armada Hflr Pr

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Armada Hflr Pr has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pacific Basin Shipping

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pacific Basin Shipping has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile 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 Armada Hflr and Pacific Basin

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

The idea behind Armada Hflr Pr and Pacific Basin 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.