Correlation Between TOP Ships and Safe Bulkers

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

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

Diversification Opportunities for TOP Ships and Safe Bulkers

0.62

Correlation Coefficient

TOP Ships  Safe Bulkers

Poor diversification

The 3 months correlation between TOP and Safe is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding TOP Ships and Safe Bulkers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Safe Bulkers 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 Safe Bulkers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Safe Bulkers has no effect on the direction of TOP Ships i.e., TOP Ships and Safe Bulkers go up and down completely randomly.

Pair Corralation between TOP Ships and Safe Bulkers

Given the investment horizon of 90 days TOP Ships is expected to generate 1.19 times more return on investment than Safe Bulkers. However, TOP Ships is 1.19 times more volatile than Safe Bulkers. It trades about -0.02 of its potential returns per unit of risk. Safe Bulkers is currently generating about -0.19 per unit of risk. If you would invest  800.00  in TOP Ships on September 4, 2024 and sell it today you would lose (30.00) from holding TOP Ships or give up 3.75% of portfolio value over 90 days.

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

TOP Ships  vs.  Safe Bulkers

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.

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.

Pair Trading with TOP Ships and Safe Bulkers

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

The idea behind TOP Ships and Safe Bulkers 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.