Correlation Between Nordic American and Safe Bulkers

Can any of the company-specific risk be diversified away by investing in both Nordic American and Safe Bulkers 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 Safe Bulkers 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 Safe Bulkers, you can compare the effects of market volatilities on Nordic American and Safe Bulkers 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 Safe Bulkers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nordic American and Safe Bulkers.

Diversification Opportunities for Nordic American and Safe Bulkers

-0.24

Correlation Coefficient

Nordic American  Safe Bulkers

Very good diversification

The 3 months correlation between Nordic and Safe is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Nordic American Tankers and Safe Bulkers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Safe Bulkers 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 Safe Bulkers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Safe Bulkers has no effect on the direction of Nordic American i.e., Nordic American and Safe Bulkers go up and down completely randomly.

Pair Corralation between Nordic American and Safe Bulkers

Considering the 90-day investment horizon Nordic American Tankers is expected to generate 1.05 times more return on investment than Safe Bulkers. However, Nordic American is 1.05 times more volatile than Safe Bulkers. It trades about 0.05 of its potential returns per unit of risk. Safe Bulkers is currently generating about 0.04 per unit of risk. If you would invest  242.00  in Nordic American Tankers on December 23, 2024 and sell it today you would earn a total of  14.00  from holding Nordic American Tankers or generate 5.79% return on investment over 90 days.

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

Nordic American Tankers  vs.  Safe Bulkers

Nordic American Tankers

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nordic American Tankers are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, Nordic American may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Safe Bulkers

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Safe Bulkers are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, Safe Bulkers is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Nordic American and Safe Bulkers

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

The idea behind Nordic American Tankers and Safe Bulkers 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.

Check out your portfolio center.

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.