Correlation Between TOP Ships and Diana Shipping

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

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

Diversification Opportunities for TOP Ships and Diana Shipping

0.72

Correlation Coefficient

TOP Ships  Diana Shipping

Poor diversification

The 3 months correlation between TOP and Diana is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding TOP Ships and Diana Shipping in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diana Shipping and TOP Ships 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 TOP Ships are associated (or correlated) with Diana Shipping. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diana Shipping has no effect on the direction of TOP Ships i.e., TOP Ships and Diana Shipping go up and down completely randomly.

Pair Corralation between TOP Ships and Diana Shipping

Given the investment horizon of 90 days TOP Ships is expected to under-perform the Diana Shipping. In addition to that, TOP Ships is 1.25 times more volatile than Diana Shipping. It trades about -0.12 of its total potential returns per unit of risk. Diana Shipping is currently generating about -0.08 per unit of volatility. If you would invest  272.00  in Diana Shipping on September 3, 2024 and sell it today you would lose (94.00) from holding Diana Shipping or give up 34.56% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.6%
Values	Daily Returns

TOP Ships  vs.  Diana Shipping

TOP Ships

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TOP Ships has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, TOP Ships is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Diana Shipping

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Diana Shipping 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 TOP Ships and Diana Shipping

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

The idea behind TOP Ships and Diana Shipping 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.