Correlation Between China Merchants and Kawasaki Kisen

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

Diversification Opportunities for China Merchants and Kawasaki Kisen

-0.36

Correlation Coefficient

China Merchants  Kawasaki Kisen

Very good diversification

The 3 months correlation between China and Kawasaki is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding China Merchants Port and Kawasaki Kisen Kaisha in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kawasaki Kisen Kaisha 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 Kawasaki Kisen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kawasaki Kisen Kaisha has no effect on the direction of China Merchants i.e., China Merchants and Kawasaki Kisen go up and down completely randomly.

Pair Corralation between China Merchants and Kawasaki Kisen

Assuming the 90 days horizon China Merchants Port is expected to generate 1.06 times more return on investment than Kawasaki Kisen. However, China Merchants is 1.06 times more volatile than Kawasaki Kisen Kaisha. It trades about 0.11 of its potential returns per unit of risk. Kawasaki Kisen Kaisha is currently generating about -0.02 per unit of risk. If you would invest  112.00  in China Merchants Port on September 27, 2024 and sell it today you would earn a total of  45.00  from holding China Merchants Port or generate 40.18% return on investment over 90 days.

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

China Merchants Port  vs.  Kawasaki Kisen Kaisha

China Merchants Port

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China Merchants Port are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, China Merchants reported solid returns over the last few months and may actually be approaching a breakup point.

Kawasaki Kisen Kaisha

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kawasaki Kisen Kaisha has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward indicators, Kawasaki Kisen 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 Kawasaki Kisen

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

The idea behind China Merchants Port and Kawasaki Kisen Kaisha 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.