Correlation Between Genco Shipping and Pacific Basin

Can any of the company-specific risk be diversified away by investing in both Genco Shipping and Pacific Basin 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 Pacific Basin 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 Pacific Basin Shipping, you can compare the effects of market volatilities on Genco Shipping and Pacific Basin 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 Pacific Basin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Genco Shipping and Pacific Basin.

Diversification Opportunities for Genco Shipping and Pacific Basin

0.75

Correlation Coefficient

Genco Shipping  Pacific Basin

Poor diversification

The 3 months correlation between Genco and Pacific is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Genco Shipping Trading and Pacific Basin Shipping in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacific Basin Shipping 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 Pacific Basin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacific Basin Shipping has no effect on the direction of Genco Shipping i.e., Genco Shipping and Pacific Basin go up and down completely randomly.

Pair Corralation between Genco Shipping and Pacific Basin

Considering the 90-day investment horizon Genco Shipping Trading is expected to generate 1.85 times more return on investment than Pacific Basin. However, Genco Shipping is 1.85 times more volatile than Pacific Basin Shipping. It trades about -0.01 of its potential returns per unit of risk. Pacific Basin Shipping is currently generating about -0.24 per unit of risk. If you would invest  1,461  in Genco Shipping Trading on October 15, 2024 and sell it today you would lose (12.00) from holding Genco Shipping Trading or give up 0.82% of portfolio value over 90 days.

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

Genco Shipping Trading  vs.  Pacific Basin Shipping

Genco Shipping Trading

Risk-Adjusted Performance

0 of 100

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 conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pacific Basin Shipping

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pacific Basin Shipping has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's fundamental drivers remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Genco Shipping and Pacific Basin

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

The idea behind Genco Shipping Trading and Pacific Basin Shipping 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.