Correlation Between China Merchants and Castor Maritime

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

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

Diversification Opportunities for China Merchants and Castor Maritime

-0.03

Correlation Coefficient

China Merchants  Castor Maritime

Good diversification

The 3 months correlation between China and Castor is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding China Merchants Port and Castor Maritime in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Castor Maritime and China Merchants 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 China Merchants Port are associated (or correlated) with Castor Maritime. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Castor Maritime has no effect on the direction of China Merchants i.e., China Merchants and Castor Maritime go up and down completely randomly.

Pair Corralation between China Merchants and Castor Maritime

Assuming the 90 days horizon China Merchants Port is expected to generate 0.84 times more return on investment than Castor Maritime. However, China Merchants Port is 1.19 times less risky than Castor Maritime. It trades about -0.06 of its potential returns per unit of risk. Castor Maritime is currently generating about -0.24 per unit of risk. If you would invest  170.00  in China Merchants Port on September 22, 2024 and sell it today you would lose (8.00) from holding China Merchants Port or give up 4.71% of portfolio value over 90 days.

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

China Merchants Port  vs.  Castor Maritime

China Merchants Port

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in China Merchants Port are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating technical indicators, China Merchants reported solid returns over the last few months and may actually be approaching a breakup point.

Castor Maritime

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Castor Maritime has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with China Merchants and Castor Maritime

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

The idea behind China Merchants Port and Castor Maritime 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.

Check out your portfolio center.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.