Correlation Between Golden Ocean and Pacific Basin

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

Diversification Opportunities for Golden Ocean and Pacific Basin

0.84

Correlation Coefficient

Golden Ocean  Pacific Basin

Very poor diversification

The 3 months correlation between Golden and Pacific is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Golden Ocean Group 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 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 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 Golden Ocean i.e., Golden Ocean and Pacific Basin go up and down completely randomly.

Pair Corralation between Golden Ocean and Pacific Basin

Given the investment horizon of 90 days Golden Ocean Group is expected to generate 0.31 times more return on investment than Pacific Basin. However, Golden Ocean Group is 3.23 times less risky than Pacific Basin. It trades about -0.2 of its potential returns per unit of risk. Pacific Basin Shipping is currently generating about -0.22 per unit of risk. If you would invest  951.00  in Golden Ocean Group on October 9, 2024 and sell it today you would lose (67.00) from holding Golden Ocean Group or give up 7.05% of portfolio value over 90 days.

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

Golden Ocean Group  vs.  Pacific Basin Shipping

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 conflicting performance in the last few months, the Stock's technical and fundamental 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. In spite of weak performance in the last few months, the Stock's fundamental drivers remain fairly 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.

Pair Trading with Golden Ocean and Pacific Basin

The main advantage of trading using opposite Golden Ocean and Pacific Basin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Golden Ocean 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 Golden Ocean Group 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.