Correlation Between Golden Ocean and Danaos

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

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

Diversification Opportunities for Golden Ocean and Danaos

0.6

Correlation Coefficient

Golden Ocean  Danaos

Poor diversification

The 3 months correlation between Golden and Danaos is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Golden Ocean Group and Danaos in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Danaos and Golden Ocean 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 Golden Ocean Group are associated (or correlated) with Danaos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Danaos has no effect on the direction of Golden Ocean i.e., Golden Ocean and Danaos go up and down completely randomly.

Pair Corralation between Golden Ocean and Danaos

Given the investment horizon of 90 days Golden Ocean Group is expected to under-perform the Danaos. In addition to that, Golden Ocean is 1.48 times more volatile than Danaos. It trades about -0.07 of its total potential returns per unit of risk. Danaos is currently generating about 0.02 per unit of volatility. If you would invest  7,868  in Danaos on August 31, 2024 and sell it today you would earn a total of  70.00  from holding Danaos or generate 0.89% return on investment over 90 days.

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

Golden Ocean Group  vs.  Danaos

Golden Ocean Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Golden Ocean Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's technical and fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Danaos

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Danaos are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Danaos is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Golden Ocean and Danaos

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

The idea behind Golden Ocean Group and Danaos 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.