Correlation Between Euroseas and EuroDry

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

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

Diversification Opportunities for Euroseas and EuroDry

0.8

Correlation Coefficient

Euroseas  EuroDry

Very poor diversification

The 3 months correlation between Euroseas and EuroDry is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Euroseas and EuroDry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EuroDry and Euroseas 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 Euroseas are associated (or correlated) with EuroDry. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EuroDry has no effect on the direction of Euroseas i.e., Euroseas and EuroDry go up and down completely randomly.

Pair Corralation between Euroseas and EuroDry

Given the investment horizon of 90 days Euroseas is expected to generate 0.65 times more return on investment than EuroDry. However, Euroseas is 1.55 times less risky than EuroDry. It trades about 0.32 of its potential returns per unit of risk. EuroDry is currently generating about 0.13 per unit of risk. If you would invest  3,434  in Euroseas on May 6, 2025 and sell it today you would earn a total of  1,703  from holding Euroseas or generate 49.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.41%
Values	Daily Returns

Euroseas  vs.  EuroDry

Euroseas

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Euroseas are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Euroseas sustained solid returns over the last few months and may actually be approaching a breakup point.

EuroDry

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in EuroDry are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, EuroDry showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Euroseas and EuroDry

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

The idea behind Euroseas and EuroDry 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..