Correlation Between Nordic American and International Seaways

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

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

Diversification Opportunities for Nordic American and International Seaways

-0.35

Correlation Coefficient

Nordic American  International Seaways

Very good diversification

The 3 months correlation between Nordic and International is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Nordic American Tankers and International Seaways in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Seaways and Nordic American 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 Nordic American Tankers are associated (or correlated) with International Seaways. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Seaways has no effect on the direction of Nordic American i.e., Nordic American and International Seaways go up and down completely randomly.

Pair Corralation between Nordic American and International Seaways

Considering the 90-day investment horizon Nordic American is expected to generate 1.76 times less return on investment than International Seaways. In addition to that, Nordic American is 1.09 times more volatile than International Seaways. It trades about 0.05 of its total potential returns per unit of risk. International Seaways is currently generating about 0.09 per unit of volatility. If you would invest  3,494  in International Seaways on January 26, 2024 and sell it today you would earn a total of  1,864  from holding International Seaways or generate 53.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.6%
Values	Daily Returns

Nordic American Tankers  vs.  International Seaways

Nordic American Tankers

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nordic American Tankers has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in May 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

International Seaways

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in International Seaways are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, International Seaways is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Nordic American and International Seaways

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

The idea behind Nordic American Tankers and International Seaways 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..