Correlation Between Shih Kuen and Chinese Maritime

Can any of the company-specific risk be diversified away by investing in both Shih Kuen and Chinese Maritime 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 Shih Kuen and Chinese Maritime into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shih Kuen Plastics and Chinese Maritime Transport, you can compare the effects of market volatilities on Shih Kuen and Chinese Maritime 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 Shih Kuen with a short position of Chinese Maritime. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shih Kuen and Chinese Maritime.

Diversification Opportunities for Shih Kuen and Chinese Maritime

0.85

Correlation Coefficient

Shih Kuen  Chinese Maritime

Very poor diversification

The 3 months correlation between Shih and Chinese is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Shih Kuen Plastics and Chinese Maritime Transport in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chinese Maritime Tra and Shih Kuen 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 Shih Kuen Plastics are associated (or correlated) with Chinese Maritime. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chinese Maritime Tra has no effect on the direction of Shih Kuen i.e., Shih Kuen and Chinese Maritime go up and down completely randomly.

Pair Corralation between Shih Kuen and Chinese Maritime

Assuming the 90 days trading horizon Shih Kuen is expected to generate 1.71 times less return on investment than Chinese Maritime. But when comparing it to its historical volatility, Shih Kuen Plastics is 2.75 times less risky than Chinese Maritime. It trades about 0.26 of its potential returns per unit of risk. Chinese Maritime Transport is currently generating about 0.16 of returns per unit of risk over similar time horizon. 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	Strong
Accuracy	100.0%
Values	Daily Returns

Shih Kuen Plastics  vs.  Chinese Maritime Transport

Shih Kuen Plastics

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Shih Kuen Plastics are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Shih Kuen may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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.

Pair Trading with Shih Kuen and Chinese Maritime

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

The idea behind Shih Kuen Plastics and Chinese Maritime 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.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.