Correlation Between COSCO SHIPPING and China Merchants
Can any of the company-specific risk be diversified away by investing in both COSCO SHIPPING and China Merchants 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 China Merchants into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between COSCO SHIPPING Ports and China Merchants Port, you can compare the effects of market volatilities on COSCO SHIPPING and China Merchants 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 China Merchants. Check out your portfolio center. Please also check ongoing floating volatility patterns of COSCO SHIPPING and China Merchants.
Diversification Opportunities for COSCO SHIPPING and China Merchants
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between COSCO and China is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding COSCO SHIPPING Ports and China Merchants Port in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Merchants Port 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 Ports are associated (or correlated) with China Merchants. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Merchants Port has no effect on the direction of COSCO SHIPPING i.e., COSCO SHIPPING and China Merchants go up and down completely randomly.
Pair Corralation between COSCO SHIPPING and China Merchants
Assuming the 90 days horizon COSCO SHIPPING Ports is expected to generate 5.74 times more return on investment than China Merchants. However, COSCO SHIPPING is 5.74 times more volatile than China Merchants Port. It trades about 0.1 of its potential returns per unit of risk. China Merchants Port is currently generating about 0.04 per unit of risk. If you would invest 80.00 in COSCO SHIPPING Ports on September 25, 2024 and sell it today you would lose (24.00) from holding COSCO SHIPPING Ports or give up 30.0% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 83.77% |
Values | Daily Returns |
COSCO SHIPPING Ports vs. China Merchants Port
Performance |
Timeline |
COSCO SHIPPING Ports |
China Merchants Port |
COSCO SHIPPING and China Merchants Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with COSCO SHIPPING and China Merchants
The main advantage of trading using opposite COSCO SHIPPING and China Merchants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if COSCO SHIPPING position performs unexpectedly, China Merchants 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 China Merchants will offset losses from the drop in China Merchants' long position.COSCO SHIPPING vs. China Merchants Port | COSCO SHIPPING vs. Diana Shipping | COSCO SHIPPING vs. ZIM Integrated Shipping |
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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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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