Correlation Between Star Bulk and EuroDry
Can any of the company-specific risk be diversified away by investing in both Star Bulk 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 Star Bulk and EuroDry 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 EuroDry, you can compare the effects of market volatilities on Star Bulk 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 Star Bulk with a short position of EuroDry. Check out your portfolio center. Please also check ongoing floating volatility patterns of Star Bulk and EuroDry.
Diversification Opportunities for Star Bulk and EuroDry
Very poor diversification
The 3 months correlation between Star and EuroDry is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Star Bulk Carriers and EuroDry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EuroDry 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 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 Star Bulk i.e., Star Bulk and EuroDry go up and down completely randomly.
Pair Corralation between Star Bulk and EuroDry
Given the investment horizon of 90 days Star Bulk Carriers is expected to generate 0.98 times more return on investment than EuroDry. However, Star Bulk Carriers is 1.02 times less risky than EuroDry. It trades about -0.01 of its potential returns per unit of risk. EuroDry is currently generating about -0.04 per unit of risk. If you would invest 1,810 in Star Bulk Carriers on November 1, 2024 and sell it today you would lose (253.50) from holding Star Bulk Carriers or give up 14.01% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Star Bulk Carriers vs. EuroDry
Performance |
| Timeline |
| Star Bulk Carriers |
| EuroDry |
Star Bulk and EuroDry Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Star Bulk and EuroDry
The main advantage of trading using opposite Star Bulk and EuroDry positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Star Bulk 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.| Star Bulk vs. Genco Shipping Trading | Star Bulk vs. Diana Shipping | Star Bulk vs. Danaos | Star Bulk vs. Golden Ocean Group |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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