Correlation Between EuroDry and Eagle Bulk

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

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

Diversification Opportunities for EuroDry and Eagle Bulk

0.13

Correlation Coefficient

EuroDry  Eagle Bulk

Average diversification

The 3 months correlation between EuroDry and Eagle is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding EuroDry and Eagle Bulk Shipping in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eagle Bulk Shipping 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 Eagle Bulk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eagle Bulk Shipping has no effect on the direction of EuroDry i.e., EuroDry and Eagle Bulk go up and down completely randomly.

Pair Corralation between EuroDry and Eagle Bulk

Given the investment horizon of 90 days EuroDry is expected to under-perform the Eagle Bulk. In addition to that, EuroDry is 1.24 times more volatile than Eagle Bulk Shipping. It trades about -0.24 of its total potential returns per unit of risk. Eagle Bulk Shipping is currently generating about -0.12 per unit of volatility. If you would invest  6,362  in Eagle Bulk Shipping on January 24, 2024 and sell it today you would lose (102.00) from holding Eagle Bulk Shipping or give up 1.6% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	55.0%
Values	Daily Returns

EuroDry  vs.  Eagle Bulk Shipping

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.

Eagle Bulk Shipping

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Eagle Bulk Shipping has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather conflicting essential indicators, Eagle Bulk exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with EuroDry and Eagle Bulk

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

The idea behind EuroDry and Eagle Bulk Shipping 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.