Correlation Between TOP Ships and Euroseas

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

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

Diversification Opportunities for TOP Ships and Euroseas

0.6

Correlation Coefficient

TOP Ships  Euroseas

Poor diversification

The 3 months correlation between TOP and Euroseas is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding TOP Ships and Euroseas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Euroseas 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 Euroseas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Euroseas has no effect on the direction of TOP Ships i.e., TOP Ships and Euroseas go up and down completely randomly.

Pair Corralation between TOP Ships and Euroseas

Given the investment horizon of 90 days TOP Ships is expected to generate 0.83 times more return on investment than Euroseas. However, TOP Ships is 1.21 times less risky than Euroseas. It trades about -0.03 of its potential returns per unit of risk. Euroseas is currently generating about -0.03 per unit of risk. If you would invest  804.00  in TOP Ships on September 3, 2024 and sell it today you would lose (45.00) from holding TOP Ships or give up 5.6% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

TOP Ships  vs.  Euroseas

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.

Euroseas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Euroseas has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Euroseas is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with TOP Ships and Euroseas

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

The idea behind TOP Ships and Euroseas 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.