It is very interesting to see the inter-relationship of Baltic Dry Index and Indian Shipping and Shipping related companies. Baltic Dry Index is the barometer for international shipping prices of various dry bulk cargoes. According to Wikipedia the index provides “an assessment of the price of moving the major raw material by sea. Taking in 26 shipping routes measured on a time charter and voyage basis, the index covers Handymax, Panamax and Capesizse dry bulk carriers carrying a rage of commodities including coal, iron ore and grain”. It represents the cost paid by a customer to have a shipping company transport raw materials across seas on the Baltic Exchange. The Baltic is owned and operated by the member buyers and sellers. This index can be used as an overall economic indicator. It measures the demand to move raw materials and precursors to production. Unlike stock and commodities market, the Baltic Dry Index is totally devoid of speculative players. If the commodity prices are firm Baltic Dry Index usually increase and vice-versa. During the year 2008 Baltic Dry index has moved above 10000 marks and even tested a high of 11793 on 20th June 2008, due to heightened economic activities. But later in the year the Baltic Dry Index fell down below 1000 mark due to economic recession and Somalia Sea pirates.
Baltic Dry Index and shipping stocks are highly correlated over the last two years. All Bulk Dry Carriers, Bulk Liquid Carriers and even the Ship manufacturing and ship repairing company stocks moved in tandem with the Baltic Dry Index. The correlation was good and positive during the last one year of study. Over the period of six months the Baltic Dry Index and the Shipping sector stocks lost correlation and it was even got worsened last three months of study. Over period of one month starting from April 8th 2009 to May 8th 2009 the correlation started picking up. The only one stock got a positive correlation over the period of one month is GE Shipping, all other stocks are still trailing behind the Baltic Dry Index, and it may regain its lost glory once again if more economic activities are visible.
CORRELATION TABLE
Baltic Dry Index and shipping stocks are highly correlated over the last two years. All Bulk Dry Carriers, Bulk Liquid Carriers and even the Ship manufacturing and ship repairing company stocks moved in tandem with the Baltic Dry Index. The correlation was good and positive during the last one year of study. Over the period of six months the Baltic Dry Index and the Shipping sector stocks lost correlation and it was even got worsened last three months of study. Over period of one month starting from April 8th 2009 to May 8th 2009 the correlation started picking up. The only one stock got a positive correlation over the period of one month is GE Shipping, all other stocks are still trailing behind the Baltic Dry Index, and it may regain its lost glory once again if more economic activities are visible.
CORRELATION TABLE
