Baltic Dry Index Doesn’t Take All Shippers Along For The Ride

The Baltic Dry Index, an index that tracks the prices for shipping dry goods around the world, has risen 115% just since October 1st, causing many to believe the economy will continue to improve.  I think part of this rally in the BDI has been cause by an economic recovery and part is because the credit markets continue to ease.  This industry relies on credit heavily.

Naturally, this rally in the Baltic Dry Index has caused investors to look at the shippers as a possible investment.  But, not all of the shippers are the same.  Some shippers are very correlated to the BDI and some aren’t.  Below are just two examples, Dryships, Inc. (DRYS) and Diana Shipping (DSX).  You would think they’d both move like the BDI.  But, the pictures tell a different story.

Let’s look at Dryships first.  The picture above is Dryships compared to the Baltic Dry Index.  The BDIY is in white and DRYS is in orange.  You can see one may zig and the other may zag.  Also, the correlation is roughly zero right now meaning it’s not correlated or inversely correlated.

On the other hand, when we look below at Diana Shipping (DSX), it’s much more correlated to the BDI.  Again, in white is the BDI and in orange is DSX.  Underneath, you can see the correlation is very high.

Therefore, if you believe the BDI will continue to rise, make sure you own the right stocks that will benefit from that rise.


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