Correlation Between Pangaea Logistic and EuroDry

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

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

Diversification Opportunities for Pangaea Logistic and EuroDry

0.8

Correlation Coefficient

Pangaea Logistic  EuroDry

Very poor diversification

The 3 months correlation between Pangaea and EuroDry is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Pangaea Logistic and EuroDry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EuroDry and Pangaea Logistic 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 Pangaea Logistic are associated (or correlated) with EuroDry. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EuroDry has no effect on the direction of Pangaea Logistic i.e., Pangaea Logistic and EuroDry go up and down completely randomly.

Pair Corralation between Pangaea Logistic and EuroDry

Given the investment horizon of 90 days Pangaea Logistic is expected to under-perform the EuroDry. But the stock apears to be less risky and, when comparing its historical volatility, Pangaea Logistic is 1.08 times less risky than EuroDry. The stock trades about -0.34 of its potential returns per unit of risk. The EuroDry is currently generating about -0.27 of returns per unit of risk over similar time horizon. If you would invest  1,499  in EuroDry on September 15, 2024 and sell it today you would lose (199.00) from holding EuroDry or give up 13.28% of portfolio value over 90 days.

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

Pangaea Logistic  vs.  EuroDry

Pangaea Logistic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pangaea Logistic has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

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.

Pair Trading with Pangaea Logistic and EuroDry

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

The idea behind Pangaea Logistic and EuroDry 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.