Correlation Between Safe Bulkers and EuroDry

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

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

Diversification Opportunities for Safe Bulkers and EuroDry

0.82

Correlation Coefficient

Safe Bulkers  EuroDry

Very poor diversification

The 3 months correlation between Safe and EuroDry is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Safe Bulkers and EuroDry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EuroDry and Safe Bulkers 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 Safe Bulkers 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 Safe Bulkers i.e., Safe Bulkers and EuroDry go up and down completely randomly.

Pair Corralation between Safe Bulkers and EuroDry

Allowing for the 90-day total investment horizon Safe Bulkers is expected to generate 1.01 times more return on investment than EuroDry. However, Safe Bulkers is 1.01 times more volatile than EuroDry. It trades about -0.16 of its potential returns per unit of risk. EuroDry is currently generating about -0.32 per unit of risk. If you would invest  468.00  in Safe Bulkers on September 5, 2024 and sell it today you would lose (87.00) from holding Safe Bulkers or give up 18.59% of portfolio value over 90 days.

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

Safe Bulkers  vs.  EuroDry

Safe Bulkers

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Safe Bulkers has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's fundamental drivers remain somewhat 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.

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 conflicting 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 Safe Bulkers and EuroDry

The main advantage of trading using opposite Safe Bulkers and EuroDry positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Safe Bulkers 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 Safe Bulkers 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .