Correlation Between Safe Bulkers and Dow Jones

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

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

Diversification Opportunities for Safe Bulkers and Dow Jones

-0.38

Correlation Coefficient

Safe Bulkers  Dow Jones

Very good diversification

The 3 months correlation between Safe and Dow is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Safe Bulkers and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial 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 Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Safe Bulkers i.e., Safe Bulkers and Dow Jones go up and down completely randomly.

Pair Corralation between Safe Bulkers and Dow Jones

Allowing for the 90-day total investment horizon Safe Bulkers is expected to generate 2.49 times more return on investment than Dow Jones. However, Safe Bulkers is 2.49 times more volatile than Dow Jones Industrial. It trades about 0.04 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about -0.03 per unit of risk. If you would invest  359.00  in Safe Bulkers on December 26, 2024 and sell it today you would earn a total of  15.00  from holding Safe Bulkers or generate 4.18% return on investment over 90 days.

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

Safe Bulkers  vs.  Dow Jones Industrial

Pair Trading with Safe Bulkers and Dow Jones

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

The idea behind Safe Bulkers and Dow Jones Industrial 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.