Correlation Between Western Bulk and Star Bulk

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

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

Diversification Opportunities for Western Bulk and Star Bulk

0.24

Correlation Coefficient

Western Bulk  Star Bulk

Modest diversification

The 3 months correlation between Western and Star is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Western Bulk Chartering and Star Bulk Carriers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Star Bulk Carriers and Western 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 Western Bulk Chartering are associated (or correlated) with Star Bulk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Star Bulk Carriers has no effect on the direction of Western Bulk i.e., Western Bulk and Star Bulk go up and down completely randomly.

Pair Corralation between Western Bulk and Star Bulk

Assuming the 90 days horizon Western Bulk Chartering is expected to under-perform the Star Bulk. In addition to that, Western Bulk is 1.22 times more volatile than Star Bulk Carriers. It trades about -0.13 of its total potential returns per unit of risk. Star Bulk Carriers is currently generating about 0.11 per unit of volatility. If you would invest  1,471  in Star Bulk Carriers on December 20, 2024 and sell it today you would earn a total of  223.00  from holding Star Bulk Carriers or generate 15.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

Western Bulk Chartering  vs.  Star Bulk Carriers

Western Bulk Chartering

Risk-Adjusted Performance

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 April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Star Bulk Carriers

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Star Bulk Carriers are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Star Bulk disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Western Bulk and Star Bulk

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

The idea behind Western Bulk Chartering and Star Bulk Carriers 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.