Correlation Between Cboe UK and Baltic Panamax

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

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

Diversification Opportunities for Cboe UK and Baltic Panamax

-0.77

Correlation Coefficient

Cboe UK  Baltic Panamax

Pay attention - limited upside

The 3 months correlation between Cboe and Baltic is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Cboe UK Consumer and Baltic Panamax in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baltic Panamax and Cboe UK 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 Cboe UK Consumer are associated (or correlated) with Baltic Panamax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baltic Panamax has no effect on the direction of Cboe UK i.e., Cboe UK and Baltic Panamax go up and down completely randomly.

Pair Corralation between Cboe UK and Baltic Panamax

If you would invest  3,168,813  in Cboe UK Consumer on September 20, 2024 and sell it today you would earn a total of  81,882  from holding Cboe UK Consumer or generate 2.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	4.55%
Values	Daily Returns

Cboe UK Consumer  vs.  Baltic Panamax

Pair Trading with Cboe UK and Baltic Panamax

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

The idea behind Cboe UK Consumer and Baltic Panamax 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.