Correlation Between Safe Bulkers and Danaos

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

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

Diversification Opportunities for Safe Bulkers and Danaos

0.74

Correlation Coefficient

Safe Bulkers  Danaos

Poor diversification

The 3 months correlation between Safe and Danaos is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Safe Bulkers and Danaos in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Danaos 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 Danaos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Danaos has no effect on the direction of Safe Bulkers i.e., Safe Bulkers and Danaos go up and down completely randomly.

Pair Corralation between Safe Bulkers and Danaos

Allowing for the 90-day total investment horizon Safe Bulkers is expected to under-perform the Danaos. In addition to that, Safe Bulkers is 1.22 times more volatile than Danaos. It trades about -0.05 of its total potential returns per unit of risk. Danaos is currently generating about 0.05 per unit of volatility. If you would invest  7,640  in Danaos on October 21, 2024 and sell it today you would earn a total of  106.00  from holding Danaos or generate 1.39% return on investment over 90 days.

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

Safe Bulkers  vs.  Danaos

Safe Bulkers

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Safe Bulkers has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's fundamental drivers remain somewhat 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.

Danaos

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Danaos has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Safe Bulkers and Danaos

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

The idea behind Safe Bulkers and Danaos 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.