Correlation Between Western Bulk and COSCO SHIPPING

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

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

Diversification Opportunities for Western Bulk and COSCO SHIPPING

0.38

Correlation Coefficient

Western Bulk  COSCO SHIPPING

Weak diversification

The 3 months correlation between Western and COSCO is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Western Bulk Chartering and COSCO SHIPPING Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COSCO SHIPPING Holdings and Western Bulk 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 Western Bulk Chartering 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 Holdings has no effect on the direction of Western Bulk i.e., Western Bulk and COSCO SHIPPING go up and down completely randomly.

Pair Corralation between Western Bulk and COSCO SHIPPING

Assuming the 90 days horizon Western Bulk Chartering is expected to generate 0.86 times more return on investment than COSCO SHIPPING. However, Western Bulk Chartering is 1.17 times less risky than COSCO SHIPPING. It trades about 0.13 of its potential returns per unit of risk. COSCO SHIPPING Holdings is currently generating about -0.04 per unit of risk. If you would invest  118.00  in Western Bulk Chartering on December 29, 2024 and sell it today you would earn a total of  18.00  from holding Western Bulk Chartering or generate 15.25% return on investment over 90 days.

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

Western Bulk Chartering  vs.  COSCO SHIPPING Holdings

Western Bulk Chartering

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Western Bulk Chartering are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Western Bulk reported solid returns over the last few months and may actually be approaching a breakup point.

COSCO SHIPPING Holdings

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Western Bulk and COSCO SHIPPING

The main advantage of trading using opposite Western Bulk and COSCO SHIPPING positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Bulk 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 Western Bulk Chartering and COSCO SHIPPING Holdings 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.