Correlation Between Pacific Basin and Costamare
Can any of the company-specific risk be diversified away by investing in both Pacific Basin and Costamare 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 Pacific Basin and Costamare into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pacific Basin Shipping and Costamare, you can compare the effects of market volatilities on Pacific Basin and Costamare 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 Pacific Basin with a short position of Costamare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pacific Basin and Costamare.
Diversification Opportunities for Pacific Basin and Costamare
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Pacific and Costamare is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Pacific Basin Shipping and Costamare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Costamare and Pacific Basin 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 Pacific Basin Shipping are associated (or correlated) with Costamare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Costamare has no effect on the direction of Pacific Basin i.e., Pacific Basin and Costamare go up and down completely randomly.
Pair Corralation between Pacific Basin and Costamare
Assuming the 90 days horizon Pacific Basin Shipping is expected to generate 2.76 times more return on investment than Costamare. However, Pacific Basin is 2.76 times more volatile than Costamare. It trades about 0.03 of its potential returns per unit of risk. Costamare is currently generating about 0.06 per unit of risk. If you would invest 27.00 in Pacific Basin Shipping on August 24, 2024 and sell it today you would lose (1.00) from holding Pacific Basin Shipping or give up 3.7% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 65.32% |
| Values | Daily Returns |
Pacific Basin Shipping vs. Costamare
Performance |
| Timeline |
| Pacific Basin Shipping |
| Costamare |
Pacific Basin and Costamare Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pacific Basin and Costamare
The main advantage of trading using opposite Pacific Basin and Costamare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pacific Basin position performs unexpectedly, Costamare 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 Costamare will offset losses from the drop in Costamare's long position.| Pacific Basin vs. American Shipping | Pacific Basin vs. EuroDry | Pacific Basin vs. Nippon Yusen Kabushiki | Pacific Basin vs. Euroseas |
| Costamare vs. Global Ship Lease | Costamare vs. Navios Maritime Partners | Costamare vs. Genco Shipping Trading | Costamare vs. Danaos |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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