Correlation Between Shan Loong and U Ming

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

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

Diversification Opportunities for Shan Loong and U Ming

0.46

Correlation Coefficient

Shan Loong  U Ming

Very weak diversification

The 3 months correlation between Shan and 2606 is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Shan Loong Transportation Co 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 Shan Loong 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 Shan Loong Transportation Co 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 Shan Loong i.e., Shan Loong and U Ming go up and down completely randomly.

Pair Corralation between Shan Loong and U Ming

Assuming the 90 days trading horizon Shan Loong Transportation Co is expected to under-perform the U Ming. But the stock apears to be less risky and, when comparing its historical volatility, Shan Loong Transportation Co is 2.63 times less risky than U Ming. The stock trades about -0.03 of its potential returns per unit of risk. The U Ming Marine Transport is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  5,890  in U Ming Marine Transport on December 28, 2024 and sell it today you would earn a total of  1,010  from holding U Ming Marine Transport or generate 17.15% return on investment over 90 days.

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

Shan Loong Transportation Co  vs.  U Ming Marine Transport

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.

U Ming Marine

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in U Ming Marine Transport are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, U Ming showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shan Loong and U Ming

The main advantage of trading using opposite Shan Loong and U Ming positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shan Loong 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 Shan Loong Transportation Co 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.