Correlation Between Breakwave Dry and US Global

Can any of the company-specific risk be diversified away by investing in both Breakwave Dry and US Global 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 US Global 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 US Global Sea, you can compare the effects of market volatilities on Breakwave Dry and US Global 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 US Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Breakwave Dry and US Global.

Diversification Opportunities for Breakwave Dry and US Global

0.79

Correlation Coefficient

Breakwave Dry  US Global

Poor diversification

The 3 months correlation between Breakwave and SEA is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Breakwave Dry Bulk and US Global Sea in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Global Sea 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 US Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Global Sea has no effect on the direction of Breakwave Dry i.e., Breakwave Dry and US Global go up and down completely randomly.

Pair Corralation between Breakwave Dry and US Global

Given the investment horizon of 90 days Breakwave Dry Bulk is expected to generate 2.1 times more return on investment than US Global. However, Breakwave Dry is 2.1 times more volatile than US Global Sea. It trades about -0.11 of its potential returns per unit of risk. US Global Sea is currently generating about -0.26 per unit of risk. If you would invest  750.00  in Breakwave Dry Bulk on October 22, 2024 and sell it today you would lose (178.00) from holding Breakwave Dry Bulk or give up 23.73% of portfolio value over 90 days.

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

Breakwave Dry Bulk  vs.  US Global Sea

Breakwave Dry Bulk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Breakwave Dry Bulk has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Etf's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the ETF investors.

US Global Sea

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days US Global Sea has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Etf's technical and fundamental indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the ETF investors.

Pair Trading with Breakwave Dry and US Global

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

The idea behind Breakwave Dry Bulk and US Global Sea 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.