Correlation Between U Ming and Her Chee

Can any of the company-specific risk be diversified away by investing in both U Ming and Her Chee 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 Her Chee 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 Her Chee Industrial, you can compare the effects of market volatilities on U Ming and Her Chee 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 Her Chee. Check out your portfolio center. Please also check ongoing floating volatility patterns of U Ming and Her Chee.

Diversification Opportunities for U Ming and Her Chee

0.93

Correlation Coefficient

U Ming  Her Chee

Almost no diversification

The 3 months correlation between 2606 and Her is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding U Ming Marine Transport and Her Chee Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Her Chee Industrial 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 Her Chee. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Her Chee Industrial has no effect on the direction of U Ming i.e., U Ming and Her Chee go up and down completely randomly.

Pair Corralation between U Ming and Her Chee

Assuming the 90 days trading horizon U Ming is expected to generate 6.36 times less return on investment than Her Chee. But when comparing it to its historical volatility, U Ming Marine Transport is 1.4 times less risky than Her Chee. It trades about 0.04 of its potential returns per unit of risk. Her Chee Industrial is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  2,120  in Her Chee Industrial on September 12, 2024 and sell it today you would earn a total of  10,230  from holding Her Chee Industrial or generate 482.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.69%
Values	Daily Returns

U Ming Marine Transport  vs.  Her Chee Industrial

U Ming Marine

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in U Ming Marine Transport are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, U Ming showed solid returns over the last few months and may actually be approaching a breakup point.

Her Chee Industrial

Risk-Adjusted Performance

28 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Her Chee Industrial are ranked lower than 28 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Her Chee showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with U Ming and Her Chee

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

The idea behind U Ming Marine Transport and Her Chee Industrial 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.