Correlation Between EuroDry and Kirby

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

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

Diversification Opportunities for EuroDry and Kirby

0.36

Correlation Coefficient

EuroDry  Kirby

Weak diversification

The 3 months correlation between EuroDry and Kirby is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding EuroDry and Kirby in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kirby 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 Kirby. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kirby has no effect on the direction of EuroDry i.e., EuroDry and Kirby go up and down completely randomly.

Pair Corralation between EuroDry and Kirby

Given the investment horizon of 90 days EuroDry is expected to generate 1.45 times more return on investment than Kirby. However, EuroDry is 1.45 times more volatile than Kirby. It trades about 0.01 of its potential returns per unit of risk. Kirby is currently generating about -0.02 per unit of risk. If you would invest  1,121  in EuroDry on December 28, 2024 and sell it today you would earn a total of  1.00  from holding EuroDry or generate 0.09% return on investment over 90 days.

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

EuroDry  vs.  Kirby

EuroDry

Risk-Adjusted Performance

Weak

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

Kirby

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kirby has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Kirby is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with EuroDry and Kirby

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

The idea behind EuroDry and Kirby 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.