Correlation Between Euroseas and Kirby

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

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

Diversification Opportunities for Euroseas and Kirby

0.24

Correlation Coefficient

Euroseas  Kirby

Modest diversification

The 3 months correlation between Euroseas and Kirby is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Euroseas and Kirby in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kirby and Euroseas 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 Euroseas 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 Euroseas i.e., Euroseas and Kirby go up and down completely randomly.

Pair Corralation between Euroseas and Kirby

Given the investment horizon of 90 days Euroseas is expected to generate about the same return on investment as Kirby. However, Euroseas is 2.19 times more volatile than Kirby. It trades about -0.02 of its potential returns per unit of risk. Kirby is currently producing about -0.04 per unit of risk. If you would invest  10,574  in Kirby on December 28, 2024 and sell it today you would lose (513.00) from holding Kirby or give up 4.85% of portfolio value over 90 days.

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

Euroseas  vs.  Kirby

Euroseas

Risk-Adjusted Performance

Very Weak

Over the last 90 days Euroseas has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Euroseas 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 Euroseas and Kirby

The main advantage of trading using opposite Euroseas and Kirby positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Euroseas 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 Euroseas 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.