Correlation Between China Container and U Ming

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

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

Diversification Opportunities for China Container and U Ming

0.5

Correlation Coefficient

China Container  U Ming

Very weak diversification

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

Pair Corralation between China Container and U Ming

Assuming the 90 days trading horizon China Container Terminal is expected to generate 2.51 times more return on investment than U Ming. However, China Container is 2.51 times more volatile than U Ming Marine Transport. It trades about 0.03 of its potential returns per unit of risk. U Ming Marine Transport is currently generating about -0.22 per unit of risk. If you would invest  3,445  in China Container Terminal on September 16, 2024 and sell it today you would earn a total of  40.00  from holding China Container Terminal or generate 1.16% return on investment over 90 days.

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

China Container Terminal  vs.  U Ming Marine Transport

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.

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.

Pair Trading with China Container and U Ming

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

The idea behind China Container Terminal and U Ming Marine Transport 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.