Correlation Between EuroDry and TOP Ships
Can any of the company-specific risk be diversified away by investing in both EuroDry and TOP Ships 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 TOP Ships into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EuroDry and TOP Ships, you can compare the effects of market volatilities on EuroDry and TOP Ships 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 TOP Ships. Check out your portfolio center. Please also check ongoing floating volatility patterns of EuroDry and TOP Ships.
Diversification Opportunities for EuroDry and TOP Ships
Poor diversification
The 3 months correlation between EuroDry and TOP is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding EuroDry and TOP Ships in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TOP Ships 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 TOP Ships. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TOP Ships has no effect on the direction of EuroDry i.e., EuroDry and TOP Ships go up and down completely randomly.
Pair Corralation between EuroDry and TOP Ships
Given the investment horizon of 90 days EuroDry is expected to under-perform the TOP Ships. But the stock apears to be less risky and, when comparing its historical volatility, EuroDry is 25.18 times less risky than TOP Ships. The stock trades about -0.02 of its potential returns per unit of risk. The TOP Ships is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 1,452 in TOP Ships on August 28, 2024 and sell it today you would lose (672.00) from holding TOP Ships or give up 46.28% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.79% |
| Values | Daily Returns |
EuroDry vs. TOP Ships
Performance |
| Timeline |
| EuroDry |
| TOP Ships |
EuroDry and TOP Ships Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EuroDry and TOP Ships
The main advantage of trading using opposite EuroDry and TOP Ships positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EuroDry position performs unexpectedly, TOP Ships 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 TOP Ships will offset losses from the drop in TOP Ships' long position.| EuroDry vs. Star Bulk Carriers | EuroDry vs. TOP Ships | EuroDry vs. Seanergy Maritime Holdings | EuroDry vs. Performance Shipping |
| TOP Ships vs. United Maritime | TOP Ships vs. Globus Maritime | TOP Ships vs. Castor Maritime | TOP Ships vs. Safe Bulkers |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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