Correlation Between Diana Shipping and TOP Ships

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

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

Diversification Opportunities for Diana Shipping and TOP Ships

0.72

Correlation Coefficient

Diana Shipping  TOP Ships

Poor diversification

The 3 months correlation between Diana and TOP is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Diana Shipping and TOP Ships in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TOP Ships and Diana Shipping 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 Diana Shipping 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 Diana Shipping i.e., Diana Shipping and TOP Ships go up and down completely randomly.

Pair Corralation between Diana Shipping and TOP Ships

Considering the 90-day investment horizon Diana Shipping is expected to generate 0.8 times more return on investment than TOP Ships. However, Diana Shipping is 1.25 times less risky than TOP Ships. It trades about -0.08 of its potential returns per unit of risk. TOP Ships is currently generating about -0.12 per unit of risk. If you would invest  272.00  in Diana Shipping on September 3, 2024 and sell it today you would lose (94.00) from holding Diana Shipping or give up 34.56% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.6%
Values	Daily Returns

Diana Shipping  vs.  TOP Ships

Diana Shipping

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Diana Shipping has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company 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 Diana Shipping and TOP Ships

The main advantage of trading using opposite Diana Shipping and TOP Ships positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diana Shipping 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 Diana Shipping 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.