Correlation Between Danaos and Castor Maritime

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

By analyzing existing cross correlation between Danaos and Castor Maritime, you can compare the effects of market volatilities on Danaos and Castor Maritime 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 Danaos with a short position of Castor Maritime. Check out your portfolio center. Please also check ongoing floating volatility patterns of Danaos and Castor Maritime.

Diversification Opportunities for Danaos and Castor Maritime

-0.3

Correlation Coefficient

Danaos  Castor Maritime

Very good diversification

The 3 months correlation between Danaos and Castor is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Danaos and Castor Maritime in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Castor Maritime and Danaos 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 Danaos are associated (or correlated) with Castor Maritime. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Castor Maritime has no effect on the direction of Danaos i.e., Danaos and Castor Maritime go up and down completely randomly.

Pair Corralation between Danaos and Castor Maritime

Considering the 90-day investment horizon Danaos is expected to generate 0.39 times more return on investment than Castor Maritime. However, Danaos is 2.55 times less risky than Castor Maritime. It trades about 0.06 of its potential returns per unit of risk. Castor Maritime is currently generating about -0.04 per unit of risk. If you would invest  5,110  in Danaos on December 28, 2024 and sell it today you would earn a total of  2,753  from holding Danaos or generate 53.87% return on investment over 90 days.

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

Danaos  vs.  Castor Maritime

Danaos

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Danaos are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Danaos is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Castor Maritime

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Danaos and Castor Maritime

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

The idea behind Danaos and Castor Maritime 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.