Correlation Between Western Bulk and AP Mller

Can any of the company-specific risk be diversified away by investing in both Western Bulk and AP Mller 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 Mller 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 Mller , you can compare the effects of market volatilities on Western Bulk and AP Mller 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 Mller. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Bulk and AP Mller.

Diversification Opportunities for Western Bulk and AP Mller

-0.77

Correlation Coefficient

Western Bulk  AP Mller

Pay attention - limited upside

The 3 months correlation between Western and AMKBF is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Western Bulk Chartering and AP Mller in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AP Mller 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 Mller. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AP Mller has no effect on the direction of Western Bulk i.e., Western Bulk and AP Mller go up and down completely randomly.

Pair Corralation between Western Bulk and AP Mller

Assuming the 90 days horizon Western Bulk Chartering is expected to under-perform the AP Mller. But the pink sheet apears to be less risky and, when comparing its historical volatility, Western Bulk Chartering is 1.7 times less risky than AP Mller. The pink sheet trades about -0.22 of its potential returns per unit of risk. The AP Mller is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  164,260  in AP Mller on September 13, 2024 and sell it today you would earn a total of  2,045  from holding AP Mller or generate 1.24% 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 Mller

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 Mller

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in AP Mller are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental drivers, AP Mller may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Western Bulk and AP Mller

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

The idea behind Western Bulk Chartering and AP Mller 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.