Correlation Between Safe Bulkers and Pacific Basin

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

By analyzing existing cross correlation between Safe Bulkers and Pacific Basin Shipping, you can compare the effects of market volatilities on Safe Bulkers and Pacific Basin 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 Pacific Basin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Safe Bulkers and Pacific Basin.

Diversification Opportunities for Safe Bulkers and Pacific Basin

0.0

Correlation Coefficient

Safe Bulkers  Pacific Basin

Pay attention - limited upside

The 3 months correlation between Safe and Pacific is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Safe Bulkers and Pacific Basin Shipping in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacific Basin Shipping 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 Pacific Basin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacific Basin Shipping has no effect on the direction of Safe Bulkers i.e., Safe Bulkers and Pacific Basin go up and down completely randomly.

Pair Corralation between Safe Bulkers and Pacific Basin

Assuming the 90 days horizon Safe Bulkers is expected to generate 189.1 times less return on investment than Pacific Basin. But when comparing it to its historical volatility, Safe Bulkers is 11.62 times less risky than Pacific Basin. It trades about 0.0 of its potential returns per unit of risk. Pacific Basin Shipping is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  420.00  in Pacific Basin Shipping on December 21, 2024 and sell it today you would earn a total of  53.00  from holding Pacific Basin Shipping or generate 12.62% return on investment over 90 days.

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

Safe Bulkers  vs.  Pacific Basin Shipping

Safe Bulkers

Risk-Adjusted Performance

Very Weak

Over the last 90 days Safe Bulkers has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Pacific Basin Shipping

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Pacific Basin Shipping are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental drivers, Pacific Basin showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Safe Bulkers and Pacific Basin

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

The idea behind Safe Bulkers and Pacific Basin 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.

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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.