Correlation Between U Ming and China Container

Can any of the company-specific risk be diversified away by investing in both U Ming and China Container 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 U Ming and China Container into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between U Ming Marine Transport and China Container Terminal, you can compare the effects of market volatilities on U Ming and China Container 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 U Ming with a short position of China Container. Check out your portfolio center. Please also check ongoing floating volatility patterns of U Ming and China Container.

Diversification Opportunities for U Ming and China Container

0.5

Correlation Coefficient

U Ming  China Container

Very weak diversification

The 3 months correlation between 2606 and China is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding U Ming Marine Transport and China Container Terminal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Container Terminal and U Ming 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 U Ming Marine Transport are associated (or correlated) with China Container. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Container Terminal has no effect on the direction of U Ming i.e., U Ming and China Container go up and down completely randomly.

Pair Corralation between U Ming and China Container

Assuming the 90 days trading horizon U Ming is expected to generate 2.12 times less return on investment than China Container. But when comparing it to its historical volatility, U Ming Marine Transport is 1.11 times less risky than China Container. It trades about 0.03 of its potential returns per unit of risk. China Container Terminal is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,250  in China Container Terminal on September 16, 2024 and sell it today you would earn a total of  1,235  from holding China Container Terminal or generate 54.89% return on investment over 90 days.

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

U Ming Marine Transport  vs.  China Container Terminal

U Ming Marine

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in U Ming Marine Transport are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, U Ming may actually be approaching a critical reversion point that can send shares even higher in January 2025.

China Container Terminal

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in China Container Terminal are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, China Container showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with U Ming and China Container

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

The idea behind U Ming Marine Transport and China Container Terminal 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.