Correlation Between COSCO SHIPPING and American Shipping

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

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

Diversification Opportunities for COSCO SHIPPING and American Shipping

-0.3

Correlation Coefficient

COSCO SHIPPING  American Shipping

Very good diversification

The 3 months correlation between COSCO and American is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding COSCO SHIPPING Holdings and American Shipping in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Shipping and COSCO SHIPPING 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 COSCO SHIPPING Holdings are associated (or correlated) with American Shipping. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Shipping has no effect on the direction of COSCO SHIPPING i.e., COSCO SHIPPING and American Shipping go up and down completely randomly.

Pair Corralation between COSCO SHIPPING and American Shipping

Assuming the 90 days horizon COSCO SHIPPING Holdings is expected to generate 2.65 times more return on investment than American Shipping. However, COSCO SHIPPING is 2.65 times more volatile than American Shipping. It trades about -0.08 of its potential returns per unit of risk. American Shipping is currently generating about -0.29 per unit of risk. If you would invest  798.00  in COSCO SHIPPING Holdings on September 5, 2024 and sell it today you would lose (62.00) from holding COSCO SHIPPING Holdings or give up 7.77% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

COSCO SHIPPING Holdings  vs.  American Shipping

COSCO SHIPPING Holdings

Risk-Adjusted Performance

8 of 100

OK

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

American Shipping

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Shipping has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's forward-looking indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with COSCO SHIPPING and American Shipping

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

The idea behind COSCO SHIPPING Holdings and American Shipping 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.