Correlation Between Chinese Maritime and Shan Loong

Can any of the company-specific risk be diversified away by investing in both Chinese Maritime and Shan Loong 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 Shan Loong 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 Shan Loong Transportation Co, you can compare the effects of market volatilities on Chinese Maritime and Shan Loong 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 Shan Loong. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chinese Maritime and Shan Loong.

Diversification Opportunities for Chinese Maritime and Shan Loong

0.38

Correlation Coefficient

Chinese Maritime  Shan Loong

Weak diversification

The 3 months correlation between Chinese and Shan is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Chinese Maritime Transport and Shan Loong Transportation Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shan Loong Transport 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 Shan Loong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shan Loong Transport has no effect on the direction of Chinese Maritime i.e., Chinese Maritime and Shan Loong go up and down completely randomly.

Pair Corralation between Chinese Maritime and Shan Loong

Assuming the 90 days trading horizon Chinese Maritime Transport is expected to generate 1.81 times more return on investment than Shan Loong. However, Chinese Maritime is 1.81 times more volatile than Shan Loong Transportation Co. It trades about 0.12 of its potential returns per unit of risk. Shan Loong Transportation Co is currently generating about -0.04 per unit of risk. If you would invest  4,080  in Chinese Maritime Transport on December 29, 2024 and sell it today you would earn a total of  545.00  from holding Chinese Maritime Transport or generate 13.36% return on investment over 90 days.

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

Chinese Maritime Transport  vs.  Shan Loong Transportation Co

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 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Chinese Maritime showed solid returns over the last few months and may actually be approaching a breakup point.

Shan Loong Transport

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shan Loong Transportation Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Shan Loong 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 Shan Loong

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

The idea behind Chinese Maritime Transport and Shan Loong Transportation Co 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.