Correlation Between Safe Bulkers and DT Midstream

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

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

Diversification Opportunities for Safe Bulkers and DT Midstream

-0.81

Correlation Coefficient

Safe Bulkers  DT Midstream

Pay attention - limited upside

The 3 months correlation between Safe and DTM is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Safe Bulkers and DT Midstream in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DT Midstream 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 DT Midstream. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DT Midstream has no effect on the direction of Safe Bulkers i.e., Safe Bulkers and DT Midstream go up and down completely randomly.

Pair Corralation between Safe Bulkers and DT Midstream

Allowing for the 90-day total investment horizon Safe Bulkers is expected to under-perform the DT Midstream. But the stock apears to be less risky and, when comparing its historical volatility, Safe Bulkers is 1.01 times less risky than DT Midstream. The stock trades about -0.27 of its potential returns per unit of risk. The DT Midstream is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  10,496  in DT Midstream on September 24, 2024 and sell it today you would lose (338.00) from holding DT Midstream or give up 3.22% of portfolio value over 90 days.

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

Safe Bulkers  vs.  DT Midstream

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 uncertain performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

DT Midstream

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in DT Midstream are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, DT Midstream displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Safe Bulkers and DT Midstream

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

The idea behind Safe Bulkers and DT Midstream 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.