Correlation Between China Merchants and Genco Shipping

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

By analyzing existing cross correlation between China Merchants Port and Genco Shipping Trading, you can compare the effects of market volatilities on China Merchants and Genco 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 China Merchants with a short position of Genco Shipping. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Merchants and Genco Shipping.

Diversification Opportunities for China Merchants and Genco Shipping

-0.15

Correlation Coefficient

China Merchants  Genco Shipping

Good diversification

The 3 months correlation between China and Genco is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding China Merchants Port and Genco Shipping Trading in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Genco Shipping Trading and China Merchants 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 Merchants Port are associated (or correlated) with Genco Shipping. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Genco Shipping Trading has no effect on the direction of China Merchants i.e., China Merchants and Genco Shipping go up and down completely randomly.

Pair Corralation between China Merchants and Genco Shipping

Assuming the 90 days horizon China Merchants Port is expected to generate 2.76 times more return on investment than Genco Shipping. However, China Merchants is 2.76 times more volatile than Genco Shipping Trading. It trades about 0.04 of its potential returns per unit of risk. Genco Shipping Trading is currently generating about 0.01 per unit of risk. If you would invest  1,260  in China Merchants Port on September 30, 2024 and sell it today you would earn a total of  410.00  from holding China Merchants Port or generate 32.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	64.59%
Values	Daily Returns

China Merchants Port  vs.  Genco Shipping Trading

China Merchants Port

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in China Merchants Port are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting technical indicators, China Merchants showed solid returns over the last few months and may actually be approaching a breakup point.

Genco Shipping Trading

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Genco Shipping Trading has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with China Merchants and Genco Shipping

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

The idea behind China Merchants Port and Genco Shipping Trading 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.