Correlation Between EuroDry and Oceanpal

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

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

Diversification Opportunities for EuroDry and Oceanpal

0.41

Correlation Coefficient

EuroDry  Oceanpal

Very weak diversification

The 3 months correlation between EuroDry and Oceanpal is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding EuroDry and Oceanpal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oceanpal 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 Oceanpal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oceanpal has no effect on the direction of EuroDry i.e., EuroDry and Oceanpal go up and down completely randomly.

Pair Corralation between EuroDry and Oceanpal

Given the investment horizon of 90 days EuroDry is expected to generate 0.83 times more return on investment than Oceanpal. However, EuroDry is 1.2 times less risky than Oceanpal. It trades about 0.05 of its potential returns per unit of risk. Oceanpal is currently generating about -0.08 per unit of risk. If you would invest  1,071  in EuroDry on December 22, 2024 and sell it today you would earn a total of  59.00  from holding EuroDry or generate 5.51% return on investment over 90 days.

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

EuroDry  vs.  Oceanpal

EuroDry

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in EuroDry are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, EuroDry may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Oceanpal

Risk-Adjusted Performance

Very Weak

Over the last 90 days Oceanpal has generated negative risk-adjusted returns adding no value to investors with long positions. Even with conflicting performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with EuroDry and Oceanpal

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

The idea behind EuroDry and Oceanpal 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.