The importance of cargo for shipping hedge funds
Shipping hedge funds have to take many factors into account. One of these is the type of cargo they carry.
SIGNIFICANT ELEMENTS
In terms of cargo, elements of significance include the level of substitutability, types that are mainly carried, commodity prices, and relevant exchange rates.
The importance is limited because the same type of cargo can often be carried by different types of ships. Cargo that has traditionally been carried in holds of dry-bulk ships are increasingly being carried in containers.
CORRELATION
One may be tempted to think that the reason why a hedge fund prefers investing in dry bulk as opposed to container ships is that freight rates for dry bulk vessels are more correlated with certain other assets.
One would assume that a correlation that there exists a correlation between commodity prices and the freight rates directly associated with these products.
Such an association would allow excellent hedging opportunities.
FREIGHT RATES
Hedgers would simply be able to buy shares or stock of commodities or anything whose investment value is uncorrelated with the price of the commodity in order to hedge against freight rates.
Ship attributes such as age, size, and cargo-carrying substitutability are negligible for some hedge funds. They are positioned at a point where the direct effects of flags are not that important anymore.
Flags have to do with ship management and many times the “nitty-gritty“ of cost decisions.
Those who deal mainly with derivatives are far removed from the direct effects of flag decisions, whether they are generally perceived to be positive or negative.
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Hi, yeah just a little thing you have to put in. Glad you liked it! I hope you have a WONDERFUL day!