Correlation Between EuroDry and Mitsui OSK

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

By analyzing existing cross correlation between EuroDry and Mitsui OSK Lines, you can compare the effects of market volatilities on EuroDry and Mitsui OSK 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 Mitsui OSK. Check out your portfolio center. Please also check ongoing floating volatility patterns of EuroDry and Mitsui OSK.

Diversification Opportunities for EuroDry and Mitsui OSK

-0.37

Correlation Coefficient

EuroDry  Mitsui OSK

Very good diversification

The 3 months correlation between EuroDry and Mitsui is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding EuroDry and Mitsui OSK Lines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsui OSK Lines 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 Mitsui OSK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitsui OSK Lines has no effect on the direction of EuroDry i.e., EuroDry and Mitsui OSK go up and down completely randomly.

Pair Corralation between EuroDry and Mitsui OSK

Given the investment horizon of 90 days EuroDry is expected to under-perform the Mitsui OSK. In addition to that, EuroDry is 1.07 times more volatile than Mitsui OSK Lines. It trades about -0.35 of its total potential returns per unit of risk. Mitsui OSK Lines is currently generating about 0.02 per unit of volatility. If you would invest  1,690  in Mitsui OSK Lines on September 13, 2024 and sell it today you would earn a total of  14.00  from holding Mitsui OSK Lines or generate 0.83% return on investment over 90 days.

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

EuroDry  vs.  Mitsui OSK Lines

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 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.

Mitsui OSK Lines

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Mitsui OSK Lines are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Mitsui OSK is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with EuroDry and Mitsui OSK

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

The idea behind EuroDry and Mitsui OSK Lines 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.