Correlation Between Diana Shipping and Danaos

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

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

Diversification Opportunities for Diana Shipping and Danaos

0.08

Correlation Coefficient

Diana Shipping  Danaos

Significant diversification

The 3 months correlation between Diana and Danaos is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Diana Shipping and Danaos in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Danaos and Diana Shipping 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 Diana Shipping are associated (or correlated) with Danaos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Danaos has no effect on the direction of Diana Shipping i.e., Diana Shipping and Danaos go up and down completely randomly.

Pair Corralation between Diana Shipping and Danaos

Considering the 90-day investment horizon Diana Shipping is expected to under-perform the Danaos. In addition to that, Diana Shipping is 1.3 times more volatile than Danaos. It trades about -0.09 of its total potential returns per unit of risk. Danaos is currently generating about 0.02 per unit of volatility. If you would invest  7,812  in Danaos on December 27, 2024 and sell it today you would earn a total of  95.00  from holding Danaos or generate 1.22% return on investment over 90 days.

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

Diana Shipping  vs.  Danaos

Diana Shipping

Risk-Adjusted Performance

Very Weak

Over the last 90 days Diana Shipping has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

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.

Pair Trading with Diana Shipping and Danaos

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

The idea behind Diana Shipping and Danaos 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.