Correlation Between Mitsui OSK and China Merchants

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

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

Diversification Opportunities for Mitsui OSK and China Merchants

0.27

Correlation Coefficient

Mitsui OSK  China Merchants

Modest diversification

The 3 months correlation between Mitsui and China is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Mitsui OSK Lines 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 Mitsui OSK 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 Mitsui OSK Lines 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 Mitsui OSK i.e., Mitsui OSK and China Merchants go up and down completely randomly.

Pair Corralation between Mitsui OSK and China Merchants

Assuming the 90 days horizon Mitsui OSK Lines is expected to under-perform the China Merchants. In addition to that, Mitsui OSK is 3.85 times more volatile than China Merchants Port. It trades about -0.17 of its total potential returns per unit of risk. China Merchants Port is currently generating about -0.22 per unit of volatility. If you would invest  1,618  in China Merchants Port on September 21, 2024 and sell it today you would lose (23.00) from holding China Merchants Port or give up 1.42% of portfolio value over 90 days.

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

Mitsui OSK Lines  vs.  China Merchants Port

Mitsui OSK Lines

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mitsui OSK Lines has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Mitsui OSK is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

China Merchants Port

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in China Merchants Port are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical indicators, China Merchants showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mitsui OSK and China Merchants

The main advantage of trading using opposite Mitsui OSK and China Merchants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mitsui OSK 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.

The idea behind Mitsui OSK Lines and China Merchants Port 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 CEOs Directory module to screen CEOs from public companies around the world.