Correlation Between EuroDry and Ardmore Shpng

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

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

Diversification Opportunities for EuroDry and Ardmore Shpng

0.14

Correlation Coefficient

EuroDry  Ardmore Shpng

Average diversification

The 3 months correlation between EuroDry and Ardmore is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding EuroDry and Ardmore Shpng in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ardmore Shpng and EuroDry 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 EuroDry are associated (or correlated) with Ardmore Shpng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ardmore Shpng has no effect on the direction of EuroDry i.e., EuroDry and Ardmore Shpng go up and down completely randomly.

Pair Corralation between EuroDry and Ardmore Shpng

Given the investment horizon of 90 days EuroDry is expected to under-perform the Ardmore Shpng. But the stock apears to be less risky and, when comparing its historical volatility, EuroDry is 1.29 times less risky than Ardmore Shpng. The stock trades about -0.19 of its potential returns per unit of risk. The Ardmore Shpng is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  1,621  in Ardmore Shpng on January 24, 2024 and sell it today you would lose (18.00) from holding Ardmore Shpng or give up 1.11% of portfolio value over 90 days.

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

EuroDry  vs.  Ardmore Shpng

EuroDry

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EuroDry has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, EuroDry is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Ardmore Shpng

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ardmore Shpng has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Ardmore Shpng is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with EuroDry and Ardmore Shpng

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

The idea behind EuroDry and Ardmore Shpng 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 Stocks Directory module to find actively traded stocks across global markets.