Correlation Between Castor Maritime and China Merchants

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

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

Diversification Opportunities for Castor Maritime and China Merchants

-0.03

Correlation Coefficient

Castor Maritime  China Merchants

Good diversification

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

Pair Corralation between Castor Maritime and China Merchants

Given the investment horizon of 90 days Castor Maritime is expected to under-perform the China Merchants. But the stock apears to be less risky and, when comparing its historical volatility, Castor Maritime is 1.44 times less risky than China Merchants. The stock trades about -0.21 of its potential returns per unit of risk. The China Merchants Port is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  147.00  in China Merchants Port on September 23, 2024 and sell it today you would earn a total of  15.00  from holding China Merchants Port or generate 10.2% return on investment over 90 days.

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

Castor Maritime  vs.  China Merchants Port

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.

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.

Pair Trading with Castor Maritime and China Merchants

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

The idea behind Castor Maritime and China Merchants Port 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.