Correlation Between Western Bulk and AP Moeller

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

By analyzing existing cross correlation between Western Bulk Chartering and AP Moeller , you can compare the effects of market volatilities on Western Bulk and AP Moeller 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 Western Bulk with a short position of AP Moeller. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Bulk and AP Moeller.

Diversification Opportunities for Western Bulk and AP Moeller

-0.61

Correlation Coefficient

Western Bulk  AP Moeller

Excellent diversification

The 3 months correlation between Western and AMKAF is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Western Bulk Chartering and AP Moeller in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AP Moeller and Western Bulk 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 Western Bulk Chartering are associated (or correlated) with AP Moeller. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AP Moeller has no effect on the direction of Western Bulk i.e., Western Bulk and AP Moeller go up and down completely randomly.

Pair Corralation between Western Bulk and AP Moeller

Assuming the 90 days horizon Western Bulk Chartering is expected to under-perform the AP Moeller. In addition to that, Western Bulk is 1.15 times more volatile than AP Moeller . It trades about -0.15 of its total potential returns per unit of risk. AP Moeller is currently generating about 0.09 per unit of volatility. If you would invest  133,500  in AP Moeller on September 13, 2024 and sell it today you would earn a total of  23,500  from holding AP Moeller or generate 17.6% return on investment over 90 days.

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

Western Bulk Chartering  vs.  AP Moeller

Western Bulk Chartering

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Bulk Chartering has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

AP Moeller

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AP Moeller are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, AP Moeller reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Western Bulk and AP Moeller

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

The idea behind Western Bulk Chartering and AP Moeller 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.