Correlation Between China Merchants and COSCO SHIPPING

Can any of the company-specific risk be diversified away by investing in both China Merchants 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 China Merchants and COSCO 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 COSCO SHIPPING Energy, you can compare the effects of market volatilities on China Merchants 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 China Merchants with a short position of COSCO SHIPPING. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Merchants and COSCO SHIPPING.

Diversification Opportunities for China Merchants and COSCO SHIPPING

0.12

Correlation Coefficient

China Merchants  COSCO SHIPPING

Average diversification

The 3 months correlation between China and COSCO is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding China Merchants Port and COSCO SHIPPING Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COSCO SHIPPING Energy 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 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 Energy has no effect on the direction of China Merchants i.e., China Merchants and COSCO SHIPPING go up and down completely randomly.

Pair Corralation between China Merchants and COSCO SHIPPING

Assuming the 90 days horizon China Merchants Port is expected to under-perform the COSCO SHIPPING. But the stock apears to be less risky and, when comparing its historical volatility, China Merchants Port is 3.32 times less risky than COSCO SHIPPING. The stock trades about -0.02 of its potential returns per unit of risk. The COSCO SHIPPING Energy is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  65.00  in COSCO SHIPPING Energy on September 26, 2024 and sell it today you would earn a total of  11.00  from holding COSCO SHIPPING Energy or generate 16.92% return on investment over 90 days.

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

China Merchants Port  vs.  COSCO SHIPPING Energy

China Merchants Port

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in China Merchants Port are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, China Merchants is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

COSCO SHIPPING Energy

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in COSCO SHIPPING Energy are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, COSCO SHIPPING reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Merchants and COSCO SHIPPING

The main advantage of trading using opposite China Merchants and COSCO SHIPPING positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Merchants 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 China Merchants Port and COSCO SHIPPING Energy 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.