Correlation Between Danaos and Cool
Can any of the company-specific risk be diversified away by investing in both Danaos and Cool 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 Danaos and Cool into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Danaos and Cool Company, you can compare the effects of market volatilities on Danaos and Cool 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 Danaos with a short position of Cool. Check out your portfolio center. Please also check ongoing floating volatility patterns of Danaos and Cool.
Diversification Opportunities for Danaos and Cool
Average diversification
The 3 months correlation between Danaos and Cool is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Danaos and Cool Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cool Company and Danaos 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 Danaos are associated (or correlated) with Cool. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cool Company has no effect on the direction of Danaos i.e., Danaos and Cool go up and down completely randomly.
Pair Corralation between Danaos and Cool
Considering the 90-day investment horizon Danaos is expected to generate 0.75 times more return on investment than Cool. However, Danaos is 1.34 times less risky than Cool. It trades about 0.07 of its potential returns per unit of risk. Cool Company is currently generating about -0.01 per unit of risk. If you would invest 4,801 in Danaos on August 28, 2024 and sell it today you would earn a total of 3,285 from holding Danaos or generate 68.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 86.26% |
| Values | Daily Returns |
Danaos vs. Cool Company
Performance |
| Timeline |
| Danaos |
| Cool Company |
Danaos and Cool Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Danaos and Cool
The main advantage of trading using opposite Danaos and Cool positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Danaos position performs unexpectedly, Cool 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 Cool will offset losses from the drop in Cool's long position.| Danaos vs. Genco Shipping Trading | Danaos vs. Costamare | Danaos vs. Ardmore Shpng | Danaos vs. Global Ship Lease |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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