Correlation Between Pacific Basin and Euroseas
Can any of the company-specific risk be diversified away by investing in both Pacific Basin and Euroseas 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 Euroseas 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 Euroseas, you can compare the effects of market volatilities on Pacific Basin and Euroseas 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 Euroseas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pacific Basin and Euroseas.
Diversification Opportunities for Pacific Basin and Euroseas
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Pacific and Euroseas is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Pacific Basin Shipping and Euroseas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Euroseas 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 Euroseas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Euroseas has no effect on the direction of Pacific Basin i.e., Pacific Basin and Euroseas go up and down completely randomly.
Pair Corralation between Pacific Basin and Euroseas
Assuming the 90 days horizon Pacific Basin Shipping is expected to under-perform the Euroseas. In addition to that, Pacific Basin is 1.39 times more volatile than Euroseas. It trades about -0.01 of its total potential returns per unit of risk. Euroseas is currently generating about 0.09 per unit of volatility. If you would invest 1,660 in Euroseas on August 27, 2024 and sell it today you would earn a total of 2,390 from holding Euroseas or generate 143.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 56.49% |
| Values | Daily Returns |
Pacific Basin Shipping vs. Euroseas
Performance |
| Timeline |
| Pacific Basin Shipping |
| Euroseas |
Pacific Basin and Euroseas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pacific Basin and Euroseas
The main advantage of trading using opposite Pacific Basin and Euroseas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pacific Basin position performs unexpectedly, Euroseas 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 Euroseas will offset losses from the drop in Euroseas' long position.| Pacific Basin vs. Copa Holdings SA | Pacific Basin vs. United Airlines Holdings | Pacific Basin vs. Delta Air Lines | Pacific Basin vs. SkyWest |
| Euroseas vs. Star Bulk Carriers | Euroseas vs. TOP Ships | Euroseas vs. Seanergy Maritime Holdings | Euroseas vs. Performance Shipping |
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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