Correlation Between American Shipping and Euroseas

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

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

Diversification Opportunities for American Shipping and Euroseas

0.57

Correlation Coefficient

American Shipping  Euroseas

Very weak diversification

The 3 months correlation between American and Euroseas is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding American Shipping and Euroseas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Euroseas 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 Euroseas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Euroseas has no effect on the direction of American Shipping i.e., American Shipping and Euroseas go up and down completely randomly.

Pair Corralation between American Shipping and Euroseas

Assuming the 90 days horizon American Shipping is expected to generate 0.39 times more return on investment than Euroseas. However, American Shipping is 2.57 times less risky than Euroseas. It trades about -0.03 of its potential returns per unit of risk. Euroseas is currently generating about -0.09 per unit of risk. If you would invest  255.00  in American Shipping on September 12, 2024 and sell it today you would lose (7.00) from holding American Shipping or give up 2.75% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

American Shipping  vs.  Euroseas

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 nearly stable forward-looking indicators, American Shipping is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Euroseas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Euroseas 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 and fundamental indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with American Shipping and Euroseas

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

The idea behind American Shipping and Euroseas 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.