Correlation Between Genco Shipping and EuroDry

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

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

Diversification Opportunities for Genco Shipping and EuroDry

0.06

Correlation Coefficient

Genco Shipping  EuroDry

Significant diversification

The 3 months correlation between Genco and EuroDry is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Genco Shipping Trading and EuroDry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EuroDry and Genco Shipping 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 Genco Shipping Trading are associated (or correlated) with EuroDry. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EuroDry has no effect on the direction of Genco Shipping i.e., Genco Shipping and EuroDry go up and down completely randomly.

Pair Corralation between Genco Shipping and EuroDry

Considering the 90-day investment horizon Genco Shipping Trading is expected to under-perform the EuroDry. But the stock apears to be less risky and, when comparing its historical volatility, Genco Shipping Trading is 1.3 times less risky than EuroDry. The stock trades about 0.0 of its potential returns per unit of risk. The EuroDry is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,121  in EuroDry on December 28, 2024 and sell it today you would lose (11.00) from holding EuroDry or give up 0.98% of portfolio value over 90 days.

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

Genco Shipping Trading  vs.  EuroDry

Genco Shipping Trading

Risk-Adjusted Performance

Very Weak

Over the last 90 days Genco Shipping Trading has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Genco Shipping is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

EuroDry

Risk-Adjusted Performance

Weak

Over the last 90 days EuroDry has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Pair Trading with Genco Shipping and EuroDry

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

The idea behind Genco Shipping Trading and EuroDry 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.