Correlation Between Chengdu Xingrong and COSCO Shipping

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

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

Diversification Opportunities for Chengdu Xingrong and COSCO Shipping

0.12

Correlation Coefficient

Chengdu Xingrong  COSCO Shipping

Average diversification

The 3 months correlation between Chengdu and COSCO is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Chengdu Xingrong Investment and COSCO Shipping Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COSCO Shipping Energy and Chengdu Xingrong 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 Chengdu Xingrong Investment are associated (or correlated) with COSCO Shipping. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COSCO Shipping Energy has no effect on the direction of Chengdu Xingrong i.e., Chengdu Xingrong and COSCO Shipping go up and down completely randomly.

Pair Corralation between Chengdu Xingrong and COSCO Shipping

Assuming the 90 days trading horizon Chengdu Xingrong Investment is expected to under-perform the COSCO Shipping. But the stock apears to be less risky and, when comparing its historical volatility, Chengdu Xingrong Investment is 1.4 times less risky than COSCO Shipping. The stock trades about -0.06 of its potential returns per unit of risk. The COSCO Shipping Energy is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,316  in COSCO Shipping Energy on October 24, 2024 and sell it today you would lose (6.00) from holding COSCO Shipping Energy or give up 0.46% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Chengdu Xingrong Investment  vs.  COSCO Shipping Energy

Chengdu Xingrong Inv

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chengdu Xingrong Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

COSCO Shipping Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days COSCO Shipping Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, COSCO Shipping is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Chengdu Xingrong and COSCO Shipping

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

The idea behind Chengdu Xingrong Investment and COSCO Shipping Energy 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.