Correlation Between Euroseas and Star Bulk

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

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

Diversification Opportunities for Euroseas and Star Bulk

0.54

Correlation Coefficient

Euroseas  Star Bulk

Very weak diversification

The 3 months correlation between Euroseas and Star is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Euroseas 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 Euroseas 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 Euroseas 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 Euroseas i.e., Euroseas and Star Bulk go up and down completely randomly.

Pair Corralation between Euroseas and Star Bulk

Given the investment horizon of 90 days Euroseas is expected to generate 1.15 times more return on investment than Star Bulk. However, Euroseas is 1.15 times more volatile than Star Bulk Carriers. It trades about 0.04 of its potential returns per unit of risk. Star Bulk Carriers is currently generating about 0.02 per unit of risk. If you would invest  2,748  in Euroseas on February 22, 2024 and sell it today you would earn a total of  1,185  from holding Euroseas or generate 43.12% return on investment over 90 days.

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

Euroseas  vs.  Star Bulk Carriers

Euroseas

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Euroseas are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Euroseas sustained solid returns over the last few months and may actually be approaching a breakup point.

Star Bulk Carriers

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Star Bulk Carriers are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite weak essential indicators, Star Bulk disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Euroseas and Star Bulk

The main advantage of trading using opposite Euroseas and Star Bulk positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Euroseas 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 Euroseas 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.

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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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..