Correlation Between American Shipping and Arendals Fossekompani

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

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

Diversification Opportunities for American Shipping and Arendals Fossekompani

-0.05

Correlation Coefficient

American Shipping  Arendals Fossekompani

Good diversification

The 3 months correlation between American and Arendals is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding American Shipping and Arendals Fossekompani ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arendals Fossekompani ASA and American Shipping 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 American Shipping are associated (or correlated) with Arendals Fossekompani. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arendals Fossekompani ASA has no effect on the direction of American Shipping i.e., American Shipping and Arendals Fossekompani go up and down completely randomly.

Pair Corralation between American Shipping and Arendals Fossekompani

Assuming the 90 days trading horizon American Shipping is expected to under-perform the Arendals Fossekompani. But the stock apears to be less risky and, when comparing its historical volatility, American Shipping is 1.7 times less risky than Arendals Fossekompani. The stock trades about -0.22 of its potential returns per unit of risk. The Arendals Fossekompani ASA is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  14,460  in Arendals Fossekompani ASA on September 25, 2024 and sell it today you would lose (160.00) from holding Arendals Fossekompani ASA or give up 1.11% of portfolio value over 90 days.

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

American Shipping  vs.  Arendals Fossekompani ASA

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.

Arendals Fossekompani ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arendals Fossekompani ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with American Shipping and Arendals Fossekompani

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

The idea behind American Shipping and Arendals Fossekompani ASA 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.