Correlation Between AP Møller and ZIM Integrated

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

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

Diversification Opportunities for AP Møller and ZIM Integrated

0.6

Correlation Coefficient

AP Møller  ZIM Integrated

Poor diversification

The 3 months correlation between DP4B and ZIM is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding AP Mller and ZIM Integrated Shipping in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZIM Integrated Shipping and AP Møller 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 ZIM Integrated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZIM Integrated Shipping has no effect on the direction of AP Møller i.e., AP Møller and ZIM Integrated go up and down completely randomly.

Pair Corralation between AP Møller and ZIM Integrated

Assuming the 90 days trading horizon AP Møller is expected to generate 3.08 times less return on investment than ZIM Integrated. But when comparing it to its historical volatility, AP Mller is 2.34 times less risky than ZIM Integrated. It trades about 0.05 of its potential returns per unit of risk. ZIM Integrated Shipping is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,556  in ZIM Integrated Shipping on September 23, 2024 and sell it today you would earn a total of  205.00  from holding ZIM Integrated Shipping or generate 13.17% return on investment over 90 days.

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

AP Mller   vs.  ZIM Integrated Shipping

AP Møller

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AP Mller are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, AP Møller may actually be approaching a critical reversion point that can send shares even higher in January 2025.

ZIM Integrated Shipping

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ZIM Integrated Shipping are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, ZIM Integrated reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AP Møller and ZIM Integrated

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

The idea behind AP Mller and ZIM Integrated 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.