Correlation Between Global Ship and Diana Shipping

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

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

Diversification Opportunities for Global Ship and Diana Shipping

0.61

Correlation Coefficient

Global Ship  Diana Shipping

Poor diversification

The 3 months correlation between Global and Diana is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Global Ship Lease and Diana Shipping in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diana Shipping and Global Ship 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 Global Ship Lease are associated (or correlated) with Diana Shipping. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diana Shipping has no effect on the direction of Global Ship i.e., Global Ship and Diana Shipping go up and down completely randomly.

Pair Corralation between Global Ship and Diana Shipping

Considering the 90-day investment horizon Global Ship is expected to generate 1.82 times less return on investment than Diana Shipping. But when comparing it to its historical volatility, Global Ship Lease is 1.53 times less risky than Diana Shipping. It trades about 0.03 of its potential returns per unit of risk. Diana Shipping is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  177.00  in Diana Shipping on November 28, 2024 and sell it today you would earn a total of  7.00  from holding Diana Shipping or generate 3.95% return on investment over 90 days.

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

Global Ship Lease  vs.  Diana Shipping

Global Ship Lease

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Global Ship Lease are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Global Ship is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Diana Shipping

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Diana Shipping are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Diana Shipping is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Global Ship and Diana Shipping

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

The idea behind Global Ship Lease and Diana 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.