Correlation Between EuroDry and Golden Ocean
Can any of the company-specific risk be diversified away by investing in both EuroDry and Golden Ocean 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 EuroDry and Golden Ocean into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EuroDry and Golden Ocean Group, you can compare the effects of market volatilities on EuroDry and Golden Ocean 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 EuroDry with a short position of Golden Ocean. Check out your portfolio center. Please also check ongoing floating volatility patterns of EuroDry and Golden Ocean.
Diversification Opportunities for EuroDry and Golden Ocean
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between EuroDry and Golden is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding EuroDry and Golden Ocean Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Golden Ocean Group and EuroDry 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 EuroDry are associated (or correlated) with Golden Ocean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Golden Ocean Group has no effect on the direction of EuroDry i.e., EuroDry and Golden Ocean go up and down completely randomly.
Pair Corralation between EuroDry and Golden Ocean
Given the investment horizon of 90 days EuroDry is expected to generate 1.12 times more return on investment than Golden Ocean. However, EuroDry is 1.12 times more volatile than Golden Ocean Group. It trades about 0.1 of its potential returns per unit of risk. Golden Ocean Group is currently generating about 0.07 per unit of risk. If you would invest 1,120 in EuroDry on November 1, 2024 and sell it today you would earn a total of 45.00 from holding EuroDry or generate 4.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
EuroDry vs. Golden Ocean Group
Performance |
| Timeline |
| EuroDry |
| Golden Ocean Group |
EuroDry and Golden Ocean Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EuroDry and Golden Ocean
The main advantage of trading using opposite EuroDry and Golden Ocean positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EuroDry position performs unexpectedly, Golden Ocean 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 Golden Ocean will offset losses from the drop in Golden Ocean's long position.The idea behind EuroDry and Golden Ocean Group 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.| Golden Ocean vs. Genco Shipping Trading | Golden Ocean vs. Global Ship Lease | Golden Ocean vs. Diana Shipping | Golden Ocean vs. Star Bulk Carriers |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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