Correlation Between AP Mller and Western Bulk

Can any of the company-specific risk be diversified away by investing in both AP Mller and Western Bulk 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 AP Mller and Western Bulk into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between AP Mller and Western Bulk Chartering, you can compare the effects of market volatilities on AP Mller and Western Bulk 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 AP Mller with a short position of Western Bulk. Check out your portfolio center. Please also check ongoing floating volatility patterns of AP Mller and Western Bulk.

Diversification Opportunities for AP Mller and Western Bulk

-0.77

Correlation Coefficient

AP Mller  Western Bulk

Pay attention - limited upside

The 3 months correlation between AMKBF and Western is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding AP Mller and Western Bulk Chartering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Bulk Chartering and AP Mller 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 AP Mller are associated (or correlated) with Western Bulk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Bulk Chartering has no effect on the direction of AP Mller i.e., AP Mller and Western Bulk go up and down completely randomly.

Pair Corralation between AP Mller and Western Bulk

Assuming the 90 days horizon AP Mller is expected to generate 0.68 times more return on investment than Western Bulk. However, AP Mller is 1.48 times less risky than Western Bulk. It trades about 0.07 of its potential returns per unit of risk. Western Bulk Chartering is currently generating about -0.15 per unit of risk. If you would invest  152,192  in AP Mller on September 14, 2024 and sell it today you would earn a total of  14,113  from holding AP Mller or generate 9.27% return on investment over 90 days.

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

AP Mller   vs.  Western Bulk Chartering

AP Mller

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in AP Mller are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental drivers, AP Mller may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Western Bulk Chartering

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Bulk Chartering 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 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 AP Mller and Western Bulk

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

The idea behind AP Mller and Western Bulk Chartering 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.