Correlation Between Breakwave Dry and IPath Series

Can any of the company-specific risk be diversified away by investing in both Breakwave Dry and IPath Series 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 Breakwave Dry and IPath Series into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Breakwave Dry Bulk and iPath Series B, you can compare the effects of market volatilities on Breakwave Dry and IPath Series 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 Breakwave Dry with a short position of IPath Series. Check out your portfolio center. Please also check ongoing floating volatility patterns of Breakwave Dry and IPath Series.

Diversification Opportunities for Breakwave Dry and IPath Series

-0.74

Correlation Coefficient

Breakwave Dry  IPath Series

Pay attention - limited upside

The 3 months correlation between Breakwave and IPath is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Breakwave Dry Bulk and iPath Series B in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iPath Series B and Breakwave Dry 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 Breakwave Dry Bulk are associated (or correlated) with IPath Series. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iPath Series B has no effect on the direction of Breakwave Dry i.e., Breakwave Dry and IPath Series go up and down completely randomly.

Pair Corralation between Breakwave Dry and IPath Series

Given the investment horizon of 90 days Breakwave Dry Bulk is expected to generate 2.22 times more return on investment than IPath Series. However, Breakwave Dry is 2.22 times more volatile than iPath Series B. It trades about 0.05 of its potential returns per unit of risk. iPath Series B is currently generating about -0.02 per unit of risk. If you would invest  592.00  in Breakwave Dry Bulk on December 29, 2024 and sell it today you would earn a total of  44.00  from holding Breakwave Dry Bulk or generate 7.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Breakwave Dry Bulk  vs.  iPath Series B

Breakwave Dry Bulk

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Breakwave Dry Bulk are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Breakwave Dry showed solid returns over the last few months and may actually be approaching a breakup point.

iPath Series B

Risk-Adjusted Performance

Very Weak

Over the last 90 days iPath Series B has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, IPath Series is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Breakwave Dry and IPath Series

The main advantage of trading using opposite Breakwave Dry and IPath Series positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Breakwave Dry position performs unexpectedly, IPath Series 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 IPath Series will offset losses from the drop in IPath Series' long position.

The idea behind Breakwave Dry Bulk and iPath Series B 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.

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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.