Correlation Between East Money and COSCO Shipping

Can any of the company-specific risk be diversified away by investing in both East Money and COSCO Shipping 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 East Money and COSCO Shipping into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between East Money Information and COSCO Shipping Energy, you can compare the effects of market volatilities on East Money and COSCO Shipping 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 East Money with a short position of COSCO Shipping. Check out your portfolio center. Please also check ongoing floating volatility patterns of East Money and COSCO Shipping.

Diversification Opportunities for East Money and COSCO Shipping

-0.55

Correlation Coefficient

East Money  COSCO Shipping

Excellent diversification

The 3 months correlation between East and COSCO is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding East Money Information and COSCO Shipping Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COSCO Shipping Energy and East Money 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 East Money Information are associated (or correlated) with COSCO Shipping. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COSCO Shipping Energy has no effect on the direction of East Money i.e., East Money and COSCO Shipping go up and down completely randomly.

Pair Corralation between East Money and COSCO Shipping

Assuming the 90 days trading horizon East Money Information is expected to generate 2.25 times more return on investment than COSCO Shipping. However, East Money is 2.25 times more volatile than COSCO Shipping Energy. It trades about 0.0 of its potential returns per unit of risk. COSCO Shipping Energy is currently generating about -0.21 per unit of risk. If you would invest  2,436  in East Money Information on October 8, 2024 and sell it today you would lose (150.00) from holding East Money Information or give up 6.16% of portfolio value over 90 days.

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

East Money Information  vs.  COSCO Shipping Energy

East Money Information

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days East Money Information has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, East Money is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

COSCO Shipping Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days COSCO Shipping Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with East Money and COSCO Shipping

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

The idea behind East Money Information and COSCO Shipping Energy 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.