Correlation Between AP Møller and Global Ship

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

By analyzing existing cross correlation between AP Mller and Global Ship Lease, you can compare the effects of market volatilities on AP Møller and Global Ship 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 Global Ship. Check out your portfolio center. Please also check ongoing floating volatility patterns of AP Møller and Global Ship.

Diversification Opportunities for AP Møller and Global Ship

-0.6

Correlation Coefficient

AP Møller  Global Ship

Excellent diversification

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

Pair Corralation between AP Møller and Global Ship

Assuming the 90 days trading horizon AP Mller is expected to generate 1.61 times more return on investment than Global Ship. However, AP Møller is 1.61 times more volatile than Global Ship Lease. It trades about -0.06 of its potential returns per unit of risk. Global Ship Lease is currently generating about -0.15 per unit of risk. If you would invest  159,450  in AP Mller on September 23, 2024 and sell it today you would lose (5,000) from holding AP Mller or give up 3.14% of portfolio value over 90 days.

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

AP Mller   vs.  Global Ship Lease

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.

Global Ship Lease

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global Ship Lease has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Global Ship is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with AP Møller and Global Ship

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

The idea behind AP Mller and Global Ship Lease 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.