Correlation Between Safe Bulkers and Performance Shipping

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

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

Diversification Opportunities for Safe Bulkers and Performance Shipping

-0.59

Correlation Coefficient

Safe Bulkers  Performance Shipping

Excellent diversification

The 3 months correlation between Safe and Performance is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Safe Bulkers and Performance Shipping in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Performance 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 Performance Shipping. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Performance Shipping has no effect on the direction of Safe Bulkers i.e., Safe Bulkers and Performance Shipping go up and down completely randomly.

Pair Corralation between Safe Bulkers and Performance Shipping

Assuming the 90 days horizon Safe Bulkers is expected to generate 0.22 times more return on investment than Performance Shipping. However, Safe Bulkers is 4.59 times less risky than Performance Shipping. It trades about 0.05 of its potential returns per unit of risk. Performance Shipping is currently generating about -0.01 per unit of risk. If you would invest  2,351  in Safe Bulkers on December 2, 2024 and sell it today you would earn a total of  174.00  from holding Safe Bulkers or generate 7.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.79%
Values	Daily Returns

Safe Bulkers  vs.  Performance Shipping

Safe Bulkers

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Safe Bulkers are ranked lower than 1 (%) 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.

Performance Shipping

Risk-Adjusted Performance

Very Weak

Over the last 90 days Performance Shipping has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Safe Bulkers and Performance Shipping

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

The idea behind Safe Bulkers and Performance 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.