Correlation Between China Merchants and Hapag-Lloyd

Can any of the company-specific risk be diversified away by investing in both China Merchants and Hapag-Lloyd 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 Hapag-Lloyd 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 Hapag Lloyd AG, you can compare the effects of market volatilities on China Merchants and Hapag-Lloyd 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 Hapag-Lloyd. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Merchants and Hapag-Lloyd.

Diversification Opportunities for China Merchants and Hapag-Lloyd

0.15

Correlation Coefficient

China Merchants  Hapag-Lloyd

Average diversification

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

Pair Corralation between China Merchants and Hapag-Lloyd

Assuming the 90 days horizon China Merchants Port is expected to generate 0.64 times more return on investment than Hapag-Lloyd. However, China Merchants Port is 1.57 times less risky than Hapag-Lloyd. It trades about 0.06 of its potential returns per unit of risk. Hapag Lloyd AG is currently generating about -0.02 per unit of risk. If you would invest  141.00  in China Merchants Port on September 25, 2024 and sell it today you would earn a total of  10.00  from holding China Merchants Port or generate 7.09% 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.  Hapag Lloyd AG

China Merchants Port

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in China Merchants Port are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, China Merchants may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Hapag Lloyd AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hapag Lloyd AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Hapag-Lloyd is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with China Merchants and Hapag-Lloyd

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

The idea behind China Merchants Port and Hapag Lloyd AG 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.