Correlation Between Kirby and EuroDry
Can any of the company-specific risk be diversified away by investing in both Kirby and EuroDry 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 Kirby and EuroDry into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kirby and EuroDry, you can compare the effects of market volatilities on Kirby and EuroDry 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 Kirby with a short position of EuroDry. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kirby and EuroDry.
Diversification Opportunities for Kirby and EuroDry
Poor diversification
The 3 months correlation between Kirby and EuroDry is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Kirby and EuroDry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EuroDry and Kirby 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 Kirby are associated (or correlated) with EuroDry. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EuroDry has no effect on the direction of Kirby i.e., Kirby and EuroDry go up and down completely randomly.
Pair Corralation between Kirby and EuroDry
Considering the 90-day investment horizon Kirby is expected to generate 0.85 times more return on investment than EuroDry. However, Kirby is 1.18 times less risky than EuroDry. It trades about 0.07 of its potential returns per unit of risk. EuroDry is currently generating about -0.04 per unit of risk. If you would invest 6,886 in Kirby on November 1, 2024 and sell it today you would earn a total of 4,326 from holding Kirby or generate 62.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Kirby vs. EuroDry
Performance |
| Timeline |
| Kirby |
| EuroDry |
Kirby and EuroDry Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kirby and EuroDry
The main advantage of trading using opposite Kirby and EuroDry positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kirby position performs unexpectedly, EuroDry 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 EuroDry will offset losses from the drop in EuroDry's long position.The idea behind Kirby and EuroDry 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.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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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