Correlation Between Star Bulk and MPC Container

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

By analyzing existing cross correlation between Star Bulk Carriers and MPC Container Ships, you can compare the effects of market volatilities on Star Bulk and MPC Container 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 Star Bulk with a short position of MPC Container. Check out your portfolio center. Please also check ongoing floating volatility patterns of Star Bulk and MPC Container.

Diversification Opportunities for Star Bulk and MPC Container

0.8

Correlation Coefficient

Star Bulk  MPC Container

Very poor diversification

The 3 months correlation between Star and MPC is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Star Bulk Carriers and MPC Container Ships in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MPC Container Ships and Star Bulk 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 Star Bulk Carriers are associated (or correlated) with MPC Container. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MPC Container Ships has no effect on the direction of Star Bulk i.e., Star Bulk and MPC Container go up and down completely randomly.

Pair Corralation between Star Bulk and MPC Container

Given the investment horizon of 90 days Star Bulk Carriers is expected to under-perform the MPC Container. But the stock apears to be less risky and, when comparing its historical volatility, Star Bulk Carriers is 1.62 times less risky than MPC Container. The stock trades about -0.29 of its potential returns per unit of risk. The MPC Container Ships is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  209.00  in MPC Container Ships on October 9, 2024 and sell it today you would lose (28.00) from holding MPC Container Ships or give up 13.4% of portfolio value over 90 days.

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

Star Bulk Carriers  vs.  MPC Container Ships

Star Bulk Carriers

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Star Bulk Carriers 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 essential indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

MPC Container Ships

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MPC Container Ships has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic 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 Star Bulk and MPC Container

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

The idea behind Star Bulk Carriers and MPC Container Ships 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.