Correlation Between Huaku Development and Chinese Maritime

Can any of the company-specific risk be diversified away by investing in both Huaku Development and Chinese Maritime 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 Huaku Development and Chinese Maritime into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Huaku Development Co and Chinese Maritime Transport, you can compare the effects of market volatilities on Huaku Development and Chinese Maritime 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 Huaku Development with a short position of Chinese Maritime. Check out your portfolio center. Please also check ongoing floating volatility patterns of Huaku Development and Chinese Maritime.

Diversification Opportunities for Huaku Development and Chinese Maritime

0.29

Correlation Coefficient

Huaku Development  Chinese Maritime

Modest diversification

The 3 months correlation between Huaku and Chinese is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Huaku Development Co and Chinese Maritime Transport in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chinese Maritime Tra and Huaku Development 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 Huaku Development Co are associated (or correlated) with Chinese Maritime. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chinese Maritime Tra has no effect on the direction of Huaku Development i.e., Huaku Development and Chinese Maritime go up and down completely randomly.

Pair Corralation between Huaku Development and Chinese Maritime

Assuming the 90 days trading horizon Huaku Development Co is expected to under-perform the Chinese Maritime. But the stock apears to be less risky and, when comparing its historical volatility, Huaku Development Co is 1.08 times less risky than Chinese Maritime. The stock trades about -0.02 of its potential returns per unit of risk. The Chinese Maritime Transport is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  4,310  in Chinese Maritime Transport on December 3, 2024 and sell it today you would earn a total of  420.00  from holding Chinese Maritime Transport or generate 9.74% return on investment over 90 days.

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

Huaku Development Co  vs.  Chinese Maritime Transport

Huaku Development

Risk-Adjusted Performance

Very Weak

Over the last 90 days Huaku Development Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Huaku Development is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Chinese Maritime Tra

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chinese Maritime Transport are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Chinese Maritime may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Huaku Development and Chinese Maritime

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

The idea behind Huaku Development Co and Chinese Maritime Transport 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.