Correlation Between Castor Maritime and TOP Ships

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

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

Diversification Opportunities for Castor Maritime and TOP Ships

0.51

Correlation Coefficient

Castor Maritime  TOP Ships

Very weak diversification

The 3 months correlation between Castor and TOP is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Castor Maritime and TOP Ships in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TOP Ships and Castor Maritime 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 Castor Maritime are associated (or correlated) with TOP Ships. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TOP Ships has no effect on the direction of Castor Maritime i.e., Castor Maritime and TOP Ships go up and down completely randomly.

Pair Corralation between Castor Maritime and TOP Ships

Given the investment horizon of 90 days Castor Maritime is expected to under-perform the TOP Ships. But the stock apears to be less risky and, when comparing its historical volatility, Castor Maritime is 1.1 times less risky than TOP Ships. The stock trades about -0.16 of its potential returns per unit of risk. The TOP Ships is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  804.00  in TOP Ships on September 3, 2024 and sell it today you would lose (45.00) from holding TOP Ships or give up 5.6% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Castor Maritime  vs.  TOP Ships

Castor Maritime

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Castor Maritime has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

TOP Ships

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TOP Ships has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, TOP Ships is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Castor Maritime and TOP Ships

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

The idea behind Castor Maritime and TOP Ships 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.