Correlation Between Star Bulk and Nordic American

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

By analyzing existing cross correlation between Star Bulk Carriers and Nordic American Tankers, you can compare the effects of market volatilities on Star Bulk and Nordic American 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 Star Bulk with a short position of Nordic American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Star Bulk and Nordic American.

Diversification Opportunities for Star Bulk and Nordic American

0.82

Correlation Coefficient

Star Bulk  Nordic American

Very poor diversification

The 3 months correlation between Star and Nordic is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Star Bulk Carriers and Nordic American Tankers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nordic American Tankers and Star Bulk 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 Star Bulk Carriers are associated (or correlated) with Nordic American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nordic American Tankers has no effect on the direction of Star Bulk i.e., Star Bulk and Nordic American go up and down completely randomly.

Pair Corralation between Star Bulk and Nordic American

Given the investment horizon of 90 days Star Bulk Carriers is expected to generate 0.85 times more return on investment than Nordic American. However, Star Bulk Carriers is 1.18 times less risky than Nordic American. It trades about -0.37 of its potential returns per unit of risk. Nordic American Tankers is currently generating about -0.35 per unit of risk. If you would invest  2,251  in Star Bulk Carriers on September 5, 2024 and sell it today you would lose (565.00) from holding Star Bulk Carriers or give up 25.1% of portfolio value over 90 days.

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

Star Bulk Carriers  vs.  Nordic American Tankers

Star Bulk Carriers

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Star Bulk Carriers 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 essential 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.

Nordic American Tankers

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nordic American Tankers 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 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 Star Bulk and Nordic American

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

The idea behind Star Bulk Carriers and Nordic American 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.