Correlation Between American Shipping and Kitron ASA

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

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

Diversification Opportunities for American Shipping and Kitron ASA

-0.07

Correlation Coefficient

American Shipping  Kitron ASA

Good diversification

The 3 months correlation between American and Kitron is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding American Shipping and Kitron ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kitron 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 Kitron ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kitron ASA has no effect on the direction of American Shipping i.e., American Shipping and Kitron ASA go up and down completely randomly.

Pair Corralation between American Shipping and Kitron ASA

Assuming the 90 days trading horizon American Shipping is expected to under-perform the Kitron ASA. But the stock apears to be less risky and, when comparing its historical volatility, American Shipping is 1.22 times less risky than Kitron ASA. The stock trades about -0.25 of its potential returns per unit of risk. The Kitron ASA is currently generating about 0.39 of returns per unit of risk over similar time horizon. If you would invest  3,028  in Kitron ASA on September 24, 2024 and sell it today you would earn a total of  400.00  from holding Kitron ASA or generate 13.21% return on investment over 90 days.

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

American Shipping  vs.  Kitron 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 latest conflicting performance, the Stock's essential indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Kitron ASA

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kitron ASA are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Kitron ASA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with American Shipping and Kitron ASA

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

The idea behind American Shipping and Kitron 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.

Check out your portfolio center.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.