Correlation Between Hongrun Construction and COSCO Shipping

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

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

Diversification Opportunities for Hongrun Construction and COSCO Shipping

-0.7

Correlation Coefficient

Hongrun Construction  COSCO Shipping

Excellent diversification

The 3 months correlation between Hongrun and COSCO is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Hongrun Construction Group 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 Hongrun Construction 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 Hongrun Construction Group 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 Hongrun Construction i.e., Hongrun Construction and COSCO Shipping go up and down completely randomly.

Pair Corralation between Hongrun Construction and COSCO Shipping

Assuming the 90 days trading horizon Hongrun Construction Group is expected to generate 0.81 times more return on investment than COSCO Shipping. However, Hongrun Construction Group is 1.24 times less risky than COSCO Shipping. It trades about 0.01 of its potential returns per unit of risk. COSCO Shipping Energy is currently generating about 0.0 per unit of risk. If you would invest  522.00  in Hongrun Construction Group on October 11, 2024 and sell it today you would lose (2.00) from holding Hongrun Construction Group or give up 0.38% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Hongrun Construction Group  vs.  COSCO Shipping Energy

Hongrun Construction

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hongrun Construction Group are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hongrun Construction sustained solid returns over the last few months and may actually be approaching a breakup point.

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 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.

Pair Trading with Hongrun Construction and COSCO Shipping

The main advantage of trading using opposite Hongrun Construction and COSCO Shipping positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hongrun Construction 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 Hongrun Construction Group 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.

Check out your portfolio center.

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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.