Correlation Between Chinese Maritime and Prince Housing

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

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

Diversification Opportunities for Chinese Maritime and Prince Housing

0.68

Correlation Coefficient

Chinese Maritime  Prince Housing

Poor diversification

The 3 months correlation between Chinese and Prince is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Chinese Maritime Transport and Prince Housing Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prince Housing Devel and Chinese Maritime 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 Chinese Maritime Transport are associated (or correlated) with Prince Housing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prince Housing Devel has no effect on the direction of Chinese Maritime i.e., Chinese Maritime and Prince Housing go up and down completely randomly.

Pair Corralation between Chinese Maritime and Prince Housing

Assuming the 90 days trading horizon Chinese Maritime Transport is expected to under-perform the Prince Housing. In addition to that, Chinese Maritime is 1.4 times more volatile than Prince Housing Development. It trades about -0.1 of its total potential returns per unit of risk. Prince Housing Development is currently generating about -0.03 per unit of volatility. If you would invest  1,035  in Prince Housing Development on October 24, 2024 and sell it today you would lose (20.00) from holding Prince Housing Development or give up 1.93% of portfolio value over 90 days.

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

Chinese Maritime Transport  vs.  Prince Housing Development

Chinese Maritime Tra

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chinese Maritime Transport has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Prince Housing Devel

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Chinese Maritime and Prince Housing

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

The idea behind Chinese Maritime Transport and Prince Housing Development 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.