Correlation Between EuroDry and Pyxis Tankers

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

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

Diversification Opportunities for EuroDry and Pyxis Tankers

0.98

Correlation Coefficient

EuroDry  Pyxis Tankers

Almost no diversification

The 3 months correlation between EuroDry and Pyxis is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding EuroDry and Pyxis Tankers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pyxis Tankers 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 Pyxis Tankers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pyxis Tankers has no effect on the direction of EuroDry i.e., EuroDry and Pyxis Tankers go up and down completely randomly.

Pair Corralation between EuroDry and Pyxis Tankers

Given the investment horizon of 90 days EuroDry is expected to under-perform the Pyxis Tankers. In addition to that, EuroDry is 1.1 times more volatile than Pyxis Tankers. It trades about -0.16 of its total potential returns per unit of risk. Pyxis Tankers is currently generating about -0.1 per unit of volatility. If you would invest  503.00  in Pyxis Tankers on September 13, 2024 and sell it today you would lose (137.20) from holding Pyxis Tankers or give up 27.28% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

EuroDry  vs.  Pyxis Tankers

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.

Pyxis Tankers

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pyxis Tankers 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 comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with EuroDry and Pyxis Tankers

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

The idea behind EuroDry and Pyxis Tankers 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.