Correlation Between Kid ASA and American Shipping

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

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

Diversification Opportunities for Kid ASA and American Shipping

-0.23

Correlation Coefficient

Kid ASA  American Shipping

Very good diversification

The 3 months correlation between Kid and American is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Kid ASA and American Shipping in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Shipping and Kid ASA 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 Kid ASA are associated (or correlated) with American Shipping. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Shipping has no effect on the direction of Kid ASA i.e., Kid ASA and American Shipping go up and down completely randomly.

Pair Corralation between Kid ASA and American Shipping

Assuming the 90 days trading horizon Kid ASA is expected to generate 1.16 times more return on investment than American Shipping. However, Kid ASA is 1.16 times more volatile than American Shipping. It trades about 0.27 of its potential returns per unit of risk. American Shipping is currently generating about -0.25 per unit of risk. If you would invest  12,300  in Kid ASA on September 24, 2024 and sell it today you would earn a total of  1,020  from holding Kid ASA or generate 8.29% return on investment over 90 days.

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

Kid ASA  vs.  American Shipping

Kid ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kid ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

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.

Pair Trading with Kid ASA and American Shipping

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

The idea behind Kid ASA and American 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.

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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.