Correlation Between Diana Shipping and Costamare

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

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

Diversification Opportunities for Diana Shipping and Costamare

0.86

Correlation Coefficient

Diana Shipping  Costamare

Very poor diversification

The 3 months correlation between Diana and Costamare is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Diana Shipping and Costamare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Costamare and Diana Shipping 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 Diana Shipping are associated (or correlated) with Costamare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Costamare has no effect on the direction of Diana Shipping i.e., Diana Shipping and Costamare go up and down completely randomly.

Pair Corralation between Diana Shipping and Costamare

Assuming the 90 days trading horizon Diana Shipping is expected to generate 1.39 times less return on investment than Costamare. But when comparing it to its historical volatility, Diana Shipping is 1.1 times less risky than Costamare. It trades about 0.09 of its potential returns per unit of risk. Costamare is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  2,622  in Costamare on June 24, 2024 and sell it today you would earn a total of  43.00  from holding Costamare or generate 1.64% return on investment over 90 days.

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

Diana Shipping  vs.  Costamare

Diana Shipping

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Diana Shipping are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Diana Shipping is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Costamare

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Costamare are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Costamare is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Diana Shipping and Costamare

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

The idea behind Diana Shipping and Costamare 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.

Check out your portfolio center.

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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.