Correlation Between Chinese Maritime and Chung Hwa

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

Diversification Opportunities for Chinese Maritime and Chung Hwa

0.76

Correlation Coefficient

Chinese Maritime  Chung Hwa

Poor diversification

The 3 months correlation between Chinese and Chung is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Chinese Maritime Transport and Chung Hwa Food in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chung Hwa Food 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 Chung Hwa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chung Hwa Food has no effect on the direction of Chinese Maritime i.e., Chinese Maritime and Chung Hwa go up and down completely randomly.

Pair Corralation between Chinese Maritime and Chung Hwa

Assuming the 90 days trading horizon Chinese Maritime Transport is expected to generate 2.44 times more return on investment than Chung Hwa. However, Chinese Maritime is 2.44 times more volatile than Chung Hwa Food. It trades about 0.16 of its potential returns per unit of risk. Chung Hwa Food is currently generating about 0.13 per unit of risk. If you would invest  4,040  in Chinese Maritime Transport on December 23, 2024 and sell it today you would earn a total of  765.00  from holding Chinese Maritime Transport or generate 18.94% return on investment over 90 days.

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

Chinese Maritime Transport  vs.  Chung Hwa Food

Chinese Maritime Tra

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chinese Maritime Transport are ranked lower than 12 (%) 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.

Chung Hwa Food

Risk-Adjusted Performance

OK

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

Pair Trading with Chinese Maritime and Chung Hwa

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

The idea behind Chinese Maritime Transport and Chung Hwa Food 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.