Correlation Between COSCO SHIPPING and Liaoning Port

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

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

Diversification Opportunities for COSCO SHIPPING and Liaoning Port

0.06

Correlation Coefficient

COSCO SHIPPING  Liaoning Port

Significant diversification

The 3 months correlation between COSCO and Liaoning is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding COSCO SHIPPING Energy and Liaoning Port CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liaoning Port CoLtd and COSCO SHIPPING 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 COSCO SHIPPING Energy are associated (or correlated) with Liaoning Port. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liaoning Port CoLtd has no effect on the direction of COSCO SHIPPING i.e., COSCO SHIPPING and Liaoning Port go up and down completely randomly.

Pair Corralation between COSCO SHIPPING and Liaoning Port

Assuming the 90 days trading horizon COSCO SHIPPING Energy is expected to under-perform the Liaoning Port. In addition to that, COSCO SHIPPING is 1.14 times more volatile than Liaoning Port CoLtd. It trades about -0.21 of its total potential returns per unit of risk. Liaoning Port CoLtd is currently generating about -0.06 per unit of volatility. If you would invest  8.15  in Liaoning Port CoLtd on September 23, 2024 and sell it today you would lose (0.20) from holding Liaoning Port CoLtd or give up 2.45% of portfolio value over 90 days.

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

COSCO SHIPPING Energy  vs.  Liaoning Port CoLtd

COSCO SHIPPING Energy

Risk-Adjusted Performance

4 of 100

Insignificant

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

Liaoning Port CoLtd

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Liaoning Port CoLtd are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Liaoning Port reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with COSCO SHIPPING and Liaoning Port

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

The idea behind COSCO SHIPPING Energy and Liaoning Port CoLtd 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.