Correlation Between U Ming and Shan Loong

Can any of the company-specific risk be diversified away by investing in both U Ming and Shan Loong 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 U Ming and Shan Loong into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between U Ming Marine Transport and Shan Loong Transportation Co, you can compare the effects of market volatilities on U Ming and Shan Loong 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 U Ming with a short position of Shan Loong. Check out your portfolio center. Please also check ongoing floating volatility patterns of U Ming and Shan Loong.

Diversification Opportunities for U Ming and Shan Loong

-0.25

Correlation Coefficient

U Ming  Shan Loong

Very good diversification

The 3 months correlation between 2606 and Shan is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding U Ming Marine Transport and Shan Loong Transportation Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shan Loong Transport and U Ming 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 U Ming Marine Transport are associated (or correlated) with Shan Loong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shan Loong Transport has no effect on the direction of U Ming i.e., U Ming and Shan Loong go up and down completely randomly.

Pair Corralation between U Ming and Shan Loong

Assuming the 90 days trading horizon U Ming Marine Transport is expected to generate 1.28 times more return on investment than Shan Loong. However, U Ming is 1.28 times more volatile than Shan Loong Transportation Co. It trades about 0.13 of its potential returns per unit of risk. Shan Loong Transportation Co is currently generating about -0.2 per unit of risk. If you would invest  5,170  in U Ming Marine Transport on September 17, 2024 and sell it today you would earn a total of  550.00  from holding U Ming Marine Transport or generate 10.64% return on investment over 90 days.

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

U Ming Marine Transport  vs.  Shan Loong Transportation Co

U Ming Marine

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in U Ming Marine Transport are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, U Ming may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Shan Loong Transport

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shan Loong Transportation Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with U Ming and Shan Loong

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

The idea behind U Ming Marine Transport and Shan Loong Transportation Co 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 Stocks Directory module to find actively traded stocks across global markets.