Correlation Between Matson and Euroseas

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

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

Diversification Opportunities for Matson and Euroseas

0.52

Correlation Coefficient

Matson  Euroseas

Very weak diversification

The 3 months correlation between Matson and Euroseas is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Matson Inc and Euroseas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Euroseas and Matson 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 Matson Inc are associated (or correlated) with Euroseas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Euroseas has no effect on the direction of Matson i.e., Matson and Euroseas go up and down completely randomly.

Pair Corralation between Matson and Euroseas

Given the investment horizon of 90 days Matson Inc is expected to under-perform the Euroseas. But the stock apears to be less risky and, when comparing its historical volatility, Matson Inc is 2.18 times less risky than Euroseas. The stock trades about -0.05 of its potential returns per unit of risk. The Euroseas is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  3,346  in Euroseas on December 29, 2024 and sell it today you would lose (309.00) from holding Euroseas or give up 9.23% of portfolio value over 90 days.

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

Matson Inc  vs.  Euroseas

Matson Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Matson Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Matson is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Euroseas

Risk-Adjusted Performance

Very Weak

Over the last 90 days Euroseas has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Euroseas is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Matson and Euroseas

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

The idea behind Matson Inc and Euroseas 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.