Correlation Between EuroDry and Costamare

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

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

Diversification Opportunities for EuroDry and Costamare

0.17

Correlation Coefficient

EuroDry  Costamare

Average diversification

The 3 months correlation between EuroDry and Costamare is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding EuroDry and Costamare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Costamare and EuroDry 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 EuroDry are associated (or correlated) with Costamare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Costamare has no effect on the direction of EuroDry i.e., EuroDry and Costamare go up and down completely randomly.

Pair Corralation between EuroDry and Costamare

Given the investment horizon of 90 days EuroDry is expected to under-perform the Costamare. But the stock apears to be less risky and, when comparing its historical volatility, EuroDry is 1.09 times less risky than Costamare. The stock trades about -0.3 of its potential returns per unit of risk. The Costamare is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,329  in Costamare on September 3, 2024 and sell it today you would lose (9.00) from holding Costamare or give up 0.68% of portfolio value over 90 days.

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

EuroDry  vs.  Costamare

EuroDry

Risk-Adjusted Performance

0 of 100

Very Weak

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

Costamare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Costamare has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Costamare is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with EuroDry and Costamare

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

The idea behind EuroDry and Costamare 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.