Correlation Between COSCO SHIPPING and Western Bulk

Can any of the company-specific risk be diversified away by investing in both COSCO SHIPPING and Western Bulk 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 Western Bulk 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 Western Bulk Chartering, you can compare the effects of market volatilities on COSCO SHIPPING and Western Bulk 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 Western Bulk. Check out your portfolio center. Please also check ongoing floating volatility patterns of COSCO SHIPPING and Western Bulk.

Diversification Opportunities for COSCO SHIPPING and Western Bulk

0.38

Correlation Coefficient

COSCO SHIPPING  Western Bulk

Weak diversification

The 3 months correlation between COSCO and Western is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding COSCO SHIPPING Holdings and Western Bulk Chartering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Bulk Chartering 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 Western Bulk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Bulk Chartering has no effect on the direction of COSCO SHIPPING i.e., COSCO SHIPPING and Western Bulk go up and down completely randomly.

Pair Corralation between COSCO SHIPPING and Western Bulk

Assuming the 90 days horizon COSCO SHIPPING Holdings is expected to under-perform the Western Bulk. In addition to that, COSCO SHIPPING is 1.17 times more volatile than Western Bulk Chartering. It trades about -0.04 of its total potential returns per unit of risk. Western Bulk Chartering is currently generating about 0.13 per unit of volatility. If you would invest  118.00  in Western Bulk Chartering on December 29, 2024 and sell it today you would earn a total of  18.00  from holding Western Bulk Chartering or generate 15.25% return on investment over 90 days.

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

COSCO SHIPPING Holdings  vs.  Western Bulk Chartering

COSCO SHIPPING Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days COSCO SHIPPING Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, COSCO SHIPPING is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Western Bulk Chartering

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Western Bulk Chartering are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Western Bulk reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with COSCO SHIPPING and Western Bulk

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

The idea behind COSCO SHIPPING Holdings and Western Bulk Chartering 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.