Correlation Between Chinese Maritime and Taiwan Navigation

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

Diversification Opportunities for Chinese Maritime and Taiwan Navigation

0.87

Correlation Coefficient

Chinese Maritime  Taiwan Navigation

Very poor diversification

The 3 months correlation between Chinese and Taiwan is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Chinese Maritime Transport and Taiwan Navigation Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Navigation 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 Taiwan Navigation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Navigation has no effect on the direction of Chinese Maritime i.e., Chinese Maritime and Taiwan Navigation go up and down completely randomly.

Pair Corralation between Chinese Maritime and Taiwan Navigation

Assuming the 90 days trading horizon Chinese Maritime Transport is expected to generate 1.44 times more return on investment than Taiwan Navigation. However, Chinese Maritime is 1.44 times more volatile than Taiwan Navigation Co. It trades about 0.02 of its potential returns per unit of risk. Taiwan Navigation Co is currently generating about -0.04 per unit of risk. If you would invest  4,155  in Chinese Maritime Transport on September 14, 2024 and sell it today you would earn a total of  30.00  from holding Chinese Maritime Transport or generate 0.72% return on investment over 90 days.

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

Chinese Maritime Transport  vs.  Taiwan Navigation Co

Chinese Maritime Tra

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Chinese Maritime Transport are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Chinese Maritime is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Taiwan Navigation

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Chinese Maritime Transport and Taiwan Navigation 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.

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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.