Correlation Between Sichuan Yahua and COSCO Shipping

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

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

Diversification Opportunities for Sichuan Yahua and COSCO Shipping

0.29

Correlation Coefficient

Sichuan Yahua  COSCO Shipping

Modest diversification

The 3 months correlation between Sichuan and COSCO is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Sichuan Yahua Industrial 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 Sichuan Yahua 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 Sichuan Yahua Industrial 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 Sichuan Yahua i.e., Sichuan Yahua and COSCO Shipping go up and down completely randomly.

Pair Corralation between Sichuan Yahua and COSCO Shipping

Assuming the 90 days trading horizon Sichuan Yahua Industrial is expected to generate 1.02 times more return on investment than COSCO Shipping. However, Sichuan Yahua is 1.02 times more volatile than COSCO Shipping Energy. It trades about 0.08 of its potential returns per unit of risk. COSCO Shipping Energy is currently generating about -0.02 per unit of risk. If you would invest  1,188  in Sichuan Yahua Industrial on December 26, 2024 and sell it today you would earn a total of  109.00  from holding Sichuan Yahua Industrial or generate 9.18% return on investment over 90 days.

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

Sichuan Yahua Industrial  vs.  COSCO Shipping Energy

Sichuan Yahua Industrial

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sichuan Yahua Industrial are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sichuan Yahua may actually be approaching a critical reversion point that can send shares even higher in April 2025.

COSCO Shipping Energy

Risk-Adjusted Performance

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 Sichuan Yahua and COSCO Shipping

The main advantage of trading using opposite Sichuan Yahua and COSCO Shipping positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sichuan Yahua 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 Sichuan Yahua Industrial 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.