Correlation Between Euroseas and Mitsui OSK

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

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

Diversification Opportunities for Euroseas and Mitsui OSK

-0.26

Correlation Coefficient

Euroseas  Mitsui OSK

Very good diversification

The 3 months correlation between Euroseas and Mitsui is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Euroseas and Mitsui OSK Lines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsui OSK Lines 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 Mitsui OSK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitsui OSK Lines has no effect on the direction of Euroseas i.e., Euroseas and Mitsui OSK go up and down completely randomly.

Pair Corralation between Euroseas and Mitsui OSK

Given the investment horizon of 90 days Euroseas is expected to generate 1.35 times more return on investment than Mitsui OSK. However, Euroseas is 1.35 times more volatile than Mitsui OSK Lines. It trades about 0.07 of its potential returns per unit of risk. Mitsui OSK Lines is currently generating about 0.05 per unit of risk. If you would invest  1,707  in Euroseas on October 11, 2024 and sell it today you would earn a total of  1,836  from holding Euroseas or generate 107.56% return on investment over 90 days.

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

Euroseas  vs.  Mitsui OSK Lines

Euroseas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Euroseas has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Mitsui OSK Lines

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mitsui OSK Lines are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Mitsui OSK may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Euroseas and Mitsui OSK

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

The idea behind Euroseas and Mitsui OSK Lines 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.