Correlation Between Nordic American and Diana Shipping

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

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

Diversification Opportunities for Nordic American and Diana Shipping

0.95

Correlation Coefficient

Nordic American  Diana Shipping

Almost no diversification

The 3 months correlation between Nordic and Diana is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Nordic American Tankers and Diana Shipping in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diana Shipping and Nordic American 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 Nordic American Tankers 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 Nordic American i.e., Nordic American and Diana Shipping go up and down completely randomly.

Pair Corralation between Nordic American and Diana Shipping

Considering the 90-day investment horizon Nordic American Tankers is expected to under-perform the Diana Shipping. But the stock apears to be less risky and, when comparing its historical volatility, Nordic American Tankers is 1.4 times less risky than Diana Shipping. The stock trades about -0.2 of its potential returns per unit of risk. The Diana Shipping is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  245.00  in Diana Shipping on October 3, 2024 and sell it today you would lose (49.00) from holding Diana Shipping or give up 20.0% of portfolio value over 90 days.

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

Nordic American Tankers  vs.  Diana Shipping

Nordic American Tankers

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nordic American Tankers has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Diana Shipping

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Diana Shipping has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators 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 Nordic American and Diana Shipping

The main advantage of trading using opposite Nordic American and Diana Shipping positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nordic American 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 Nordic American Tankers 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.