Correlation Between Nippon Yusen and COSCO SHIPPING

Can any of the company-specific risk be diversified away by investing in both Nippon Yusen 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 Nippon Yusen and COSCO SHIPPING into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Nippon Yusen Kabushiki and COSCO SHIPPING Development, you can compare the effects of market volatilities on Nippon Yusen 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 Nippon Yusen with a short position of COSCO SHIPPING. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nippon Yusen and COSCO SHIPPING.

Diversification Opportunities for Nippon Yusen and COSCO SHIPPING

0.43

Correlation Coefficient

Nippon Yusen  COSCO SHIPPING

Very weak diversification

The 3 months correlation between Nippon and COSCO is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Nippon Yusen Kabushiki and COSCO SHIPPING Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COSCO SHIPPING Devel and Nippon Yusen 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 Nippon Yusen Kabushiki 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 Devel has no effect on the direction of Nippon Yusen i.e., Nippon Yusen and COSCO SHIPPING go up and down completely randomly.

Pair Corralation between Nippon Yusen and COSCO SHIPPING

Assuming the 90 days horizon Nippon Yusen is expected to generate 29.73 times less return on investment than COSCO SHIPPING. But when comparing it to its historical volatility, Nippon Yusen Kabushiki is 10.92 times less risky than COSCO SHIPPING. It trades about 0.04 of its potential returns per unit of risk. COSCO SHIPPING Development is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  14.00  in COSCO SHIPPING Development on September 3, 2024 and sell it today you would lose (3.00) from holding COSCO SHIPPING Development or give up 21.43% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	61.01%
Values	Daily Returns

Nippon Yusen Kabushiki  vs.  COSCO SHIPPING Development

Nippon Yusen Kabushiki

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nippon Yusen Kabushiki has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

COSCO SHIPPING Devel

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Nippon Yusen and COSCO SHIPPING

The main advantage of trading using opposite Nippon Yusen and COSCO SHIPPING positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nippon Yusen 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 Nippon Yusen Kabushiki and COSCO SHIPPING Development 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.