Correlation Between AP Moeller and COSCO SHIPPING

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

By analyzing existing cross correlation between AP Moeller Maersk AS and COSCO SHIPPING Ports, you can compare the effects of market volatilities on AP Moeller 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 AP Moeller with a short position of COSCO SHIPPING. Check out your portfolio center. Please also check ongoing floating volatility patterns of AP Moeller and COSCO SHIPPING.

Diversification Opportunities for AP Moeller and COSCO SHIPPING

-0.27

Correlation Coefficient

AP Moeller  COSCO SHIPPING

Very good diversification

The 3 months correlation between AMKBY and COSCO is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding AP Moeller Maersk AS and COSCO SHIPPING Ports in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COSCO SHIPPING Ports and AP Moeller 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 AP Moeller Maersk AS 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 Ports has no effect on the direction of AP Moeller i.e., AP Moeller and COSCO SHIPPING go up and down completely randomly.

Pair Corralation between AP Moeller and COSCO SHIPPING

Assuming the 90 days horizon AP Moeller is expected to generate 56.76 times less return on investment than COSCO SHIPPING. But when comparing it to its historical volatility, AP Moeller Maersk AS is 12.16 times less risky than COSCO SHIPPING. It trades about 0.02 of its potential returns per unit of risk. COSCO SHIPPING Ports is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  80.00  in COSCO SHIPPING Ports on September 26, 2024 and sell it today you would lose (24.00) from holding COSCO SHIPPING Ports or give up 30.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	77.02%
Values	Daily Returns

AP Moeller Maersk AS  vs.  COSCO SHIPPING Ports

AP Moeller Maersk

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AP Moeller Maersk AS are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental drivers, AP Moeller is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

COSCO SHIPPING Ports

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in COSCO SHIPPING Ports are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable forward-looking signals, COSCO SHIPPING is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with AP Moeller and COSCO SHIPPING

The main advantage of trading using opposite AP Moeller and COSCO SHIPPING positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AP Moeller 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 AP Moeller Maersk AS and COSCO SHIPPING Ports 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.