Correlation Between Stolt Nielsen and American Shipping

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

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

Diversification Opportunities for Stolt Nielsen and American Shipping

-0.23

Correlation Coefficient

Stolt Nielsen  American Shipping

Very good diversification

The 3 months correlation between Stolt and American is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Stolt Nielsen Limited and American Shipping in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Shipping and Stolt Nielsen 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 Stolt Nielsen Limited 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 Stolt Nielsen i.e., Stolt Nielsen and American Shipping go up and down completely randomly.

Pair Corralation between Stolt Nielsen and American Shipping

Assuming the 90 days trading horizon Stolt Nielsen Limited is expected to under-perform the American Shipping. In addition to that, Stolt Nielsen is 1.07 times more volatile than American Shipping. It trades about -0.2 of its total potential returns per unit of risk. American Shipping is currently generating about -0.04 per unit of volatility. If you would invest  2,705  in American Shipping on September 21, 2024 and sell it today you would lose (185.00) from holding American Shipping or give up 6.84% of portfolio value over 90 days.

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

Stolt Nielsen Limited  vs.  American Shipping

Stolt Nielsen Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stolt Nielsen Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's forward indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing 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 quite persistent essential indicators, American Shipping is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Stolt Nielsen and American Shipping

The main advantage of trading using opposite Stolt Nielsen and American Shipping positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stolt Nielsen 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 Stolt Nielsen Limited 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.

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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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.