Correlation Between Golden Ocean and EuroDry

Can any of the company-specific risk be diversified away by investing in both Golden Ocean 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 Golden Ocean and EuroDry 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 EuroDry, you can compare the effects of market volatilities on Golden Ocean 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 Golden Ocean with a short position of EuroDry. Check out your portfolio center. Please also check ongoing floating volatility patterns of Golden Ocean and EuroDry.

Diversification Opportunities for Golden Ocean and EuroDry

-0.05

Correlation Coefficient

Golden Ocean  EuroDry

Good diversification

The 3 months correlation between Golden and EuroDry is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Golden Ocean Group and EuroDry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EuroDry 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 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 Golden Ocean i.e., Golden Ocean and EuroDry go up and down completely randomly.

Pair Corralation between Golden Ocean and EuroDry

Given the investment horizon of 90 days Golden Ocean is expected to generate 9.53 times less return on investment than EuroDry. In addition to that, Golden Ocean is 1.3 times more volatile than EuroDry. It trades about 0.0 of its total potential returns per unit of risk. EuroDry is currently generating about 0.01 per unit of volatility. If you would invest  1,121  in EuroDry on December 29, 2024 and sell it today you would earn a total of  1.00  from holding EuroDry or generate 0.09% return on investment over 90 days.

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

Golden Ocean Group  vs.  EuroDry

Golden Ocean Group

Risk-Adjusted Performance

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 quite persistent technical and fundamental indicators, Golden Ocean 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 Golden Ocean and EuroDry

The main advantage of trading using opposite Golden Ocean and EuroDry positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Golden Ocean 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 Golden Ocean Group 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.