Correlation Between China Times and Chinese Maritime

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

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

Diversification Opportunities for China Times and Chinese Maritime

-0.13

Correlation Coefficient

China Times  Chinese Maritime

Good diversification

The 3 months correlation between China and Chinese is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding China Times Publishing 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 China Times 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 Times Publishing 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 China Times i.e., China Times and Chinese Maritime go up and down completely randomly.

Pair Corralation between China Times and Chinese Maritime

Assuming the 90 days trading horizon China Times Publishing is expected to generate 2.7 times more return on investment than Chinese Maritime. However, China Times is 2.7 times more volatile than Chinese Maritime Transport. It trades about 0.04 of its potential returns per unit of risk. Chinese Maritime Transport is currently generating about -0.06 per unit of risk. If you would invest  1,845  in China Times Publishing on September 23, 2024 and sell it today you would earn a total of  105.00  from holding China Times Publishing or generate 5.69% return on investment over 90 days.

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

China Times Publishing  vs.  Chinese Maritime Transport

China Times Publishing

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in China Times Publishing are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, China Times may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Chinese Maritime Tra

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chinese Maritime Transport has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Chinese Maritime is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with China Times and Chinese Maritime

The main advantage of trading using opposite China Times and Chinese Maritime positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Times 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 China Times Publishing 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.