Correlation Between Danaos and Performance Shipping

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

By analyzing existing cross correlation between Danaos and Performance Shipping, you can compare the effects of market volatilities on Danaos and Performance Shipping 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 Performance Shipping. Check out your portfolio center. Please also check ongoing floating volatility patterns of Danaos and Performance Shipping.

Diversification Opportunities for Danaos and Performance Shipping

0.32

Correlation Coefficient

Danaos  Performance Shipping

Weak diversification

The 3 months correlation between Danaos and Performance is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Danaos and Performance Shipping in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Performance Shipping 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 Performance Shipping. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Performance Shipping has no effect on the direction of Danaos i.e., Danaos and Performance Shipping go up and down completely randomly.

Pair Corralation between Danaos and Performance Shipping

Considering the 90-day investment horizon Danaos is expected to generate 0.58 times more return on investment than Performance Shipping. However, Danaos is 1.73 times less risky than Performance Shipping. It trades about 0.04 of its potential returns per unit of risk. Performance Shipping is currently generating about 0.02 per unit of risk. If you would invest  7,153  in Danaos on October 2, 2024 and sell it today you would earn a total of  746.50  from holding Danaos or generate 10.44% return on investment over 90 days.

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

Danaos  vs.  Performance Shipping

Danaos

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Danaos has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Performance Shipping

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Performance Shipping are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical indicators, Performance Shipping is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Danaos and Performance Shipping

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

The idea behind Danaos and Performance Shipping 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.