Correlation Between Safe Bulkers and Covenant Logistics

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

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

Diversification Opportunities for Safe Bulkers and Covenant Logistics

0.42

Correlation Coefficient

Safe Bulkers  Covenant Logistics

Very weak diversification

The 3 months correlation between Safe and Covenant is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Safe Bulkers and Covenant Logistics Group, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Covenant Logistics Group, and Safe Bulkers 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 Safe Bulkers are associated (or correlated) with Covenant Logistics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Covenant Logistics Group, has no effect on the direction of Safe Bulkers i.e., Safe Bulkers and Covenant Logistics go up and down completely randomly.

Pair Corralation between Safe Bulkers and Covenant Logistics

Assuming the 90 days horizon Safe Bulkers is expected to generate 7.45 times less return on investment than Covenant Logistics. But when comparing it to its historical volatility, Safe Bulkers is 4.63 times less risky than Covenant Logistics. It trades about 0.05 of its potential returns per unit of risk. Covenant Logistics Group, is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  5,277  in Covenant Logistics Group, on August 31, 2024 and sell it today you would earn a total of  514.00  from holding Covenant Logistics Group, or generate 9.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	90.48%
Values	Daily Returns

Safe Bulkers  vs.  Covenant Logistics Group,

Safe Bulkers

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Safe Bulkers are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Safe Bulkers is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Covenant Logistics Group,

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Covenant Logistics Group, are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain essential indicators, Covenant Logistics may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Safe Bulkers and Covenant Logistics

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

The idea behind Safe Bulkers and Covenant Logistics Group, 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.