Correlation Between Star Bulk and Western Bulk

Can any of the company-specific risk be diversified away by investing in both Star Bulk and Western Bulk 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 Western Bulk 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 Western Bulk Chartering, you can compare the effects of market volatilities on Star Bulk and Western Bulk 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 Western Bulk. Check out your portfolio center. Please also check ongoing floating volatility patterns of Star Bulk and Western Bulk.

Diversification Opportunities for Star Bulk and Western Bulk

0.72

Correlation Coefficient

Star Bulk  Western Bulk

Poor diversification

The 3 months correlation between Star and Western is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Star Bulk Carriers and Western Bulk Chartering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Bulk Chartering 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 Western Bulk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Bulk Chartering has no effect on the direction of Star Bulk i.e., Star Bulk and Western Bulk go up and down completely randomly.

Pair Corralation between Star Bulk and Western Bulk

Given the investment horizon of 90 days Star Bulk Carriers is expected to under-perform the Western Bulk. But the stock apears to be less risky and, when comparing its historical volatility, Star Bulk Carriers is 4.73 times less risky than Western Bulk. The stock trades about -0.01 of its potential returns per unit of risk. The Western Bulk Chartering is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  371.00  in Western Bulk Chartering on October 9, 2024 and sell it today you would lose (253.00) from holding Western Bulk Chartering or give up 68.19% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Star Bulk Carriers  vs.  Western Bulk Chartering

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.

Western Bulk Chartering

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Bulk Chartering has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Star Bulk and Western Bulk

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

The idea behind Star Bulk Carriers and Western Bulk Chartering 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.