Correlation Between Star Bulk and Cool
Can any of the company-specific risk be diversified away by investing in both Star Bulk and Cool 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 Star Bulk and Cool into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Star Bulk Carriers and Cool Company, you can compare the effects of market volatilities on Star Bulk and Cool 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 Star Bulk with a short position of Cool. Check out your portfolio center. Please also check ongoing floating volatility patterns of Star Bulk and Cool.
Diversification Opportunities for Star Bulk and Cool
Poor diversification
The 3 months correlation between Star and Cool is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Star Bulk Carriers and Cool Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cool Company and Star Bulk 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 Star Bulk Carriers are associated (or correlated) with Cool. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cool Company has no effect on the direction of Star Bulk i.e., Star Bulk and Cool go up and down completely randomly.
Pair Corralation between Star Bulk and Cool
Given the investment horizon of 90 days Star Bulk Carriers is expected to generate 0.94 times more return on investment than Cool. However, Star Bulk Carriers is 1.06 times less risky than Cool. It trades about 0.01 of its potential returns per unit of risk. Cool Company is currently generating about -0.01 per unit of risk. If you would invest 1,716 in Star Bulk Carriers on September 3, 2024 and sell it today you would earn a total of 16.00 from holding Star Bulk Carriers or generate 0.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 87.07% |
| Values | Daily Returns |
Star Bulk Carriers vs. Cool Company
Performance |
| Timeline |
| Star Bulk Carriers |
| Cool Company |
Star Bulk and Cool Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Star Bulk and Cool
The main advantage of trading using opposite Star Bulk and Cool positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Star Bulk position performs unexpectedly, Cool 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 Cool will offset losses from the drop in Cool's long position.| Star Bulk vs. Genco Shipping Trading | Star Bulk vs. Golden Ocean Group | Star Bulk vs. TOP Ships | Star Bulk vs. Seanergy Maritime Holdings |
| Cool vs. Northstar Clean Technologies | Cool vs. CVW CleanTech | Cool vs. Braskem SA Class | Cool vs. Luxfer Holdings PLC |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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