Correlation Between Pacific Basin and Hapag Lloyd

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

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

Diversification Opportunities for Pacific Basin and Hapag Lloyd

0.13

Correlation Coefficient

Pacific Basin  Hapag Lloyd

Average diversification

The 3 months correlation between Pacific and Hapag is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Pacific Basin Shipping and Hapag Lloyd Aktiengesellschaft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hapag Lloyd Aktienge and Pacific Basin 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 Pacific Basin Shipping are associated (or correlated) with Hapag Lloyd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hapag Lloyd Aktienge has no effect on the direction of Pacific Basin i.e., Pacific Basin and Hapag Lloyd go up and down completely randomly.

Pair Corralation between Pacific Basin and Hapag Lloyd

Assuming the 90 days horizon Pacific Basin is expected to generate 3.04 times less return on investment than Hapag Lloyd. In addition to that, Pacific Basin is 1.53 times more volatile than Hapag Lloyd Aktiengesellschaft. It trades about 0.01 of its total potential returns per unit of risk. Hapag Lloyd Aktiengesellschaft is currently generating about 0.05 per unit of volatility. If you would invest  15,417  in Hapag Lloyd Aktiengesellschaft on September 15, 2024 and sell it today you would earn a total of  1,356  from holding Hapag Lloyd Aktiengesellschaft or generate 8.8% return on investment over 90 days.

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

Pacific Basin Shipping  vs.  Hapag Lloyd Aktiengesellschaft

Pacific Basin Shipping

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pacific Basin Shipping has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental drivers, Pacific Basin is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Hapag Lloyd Aktienge

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hapag Lloyd Aktiengesellschaft are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Hapag Lloyd may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Pacific Basin and Hapag Lloyd

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

The idea behind Pacific Basin Shipping and Hapag Lloyd Aktiengesellschaft 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.