Correlation Between Hapag-Lloyd and China Merchants

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

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

Diversification Opportunities for Hapag-Lloyd and China Merchants

0.15

Correlation Coefficient

Hapag-Lloyd  China Merchants

Average diversification

The 3 months correlation between Hapag-Lloyd and China is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Hapag Lloyd AG 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 Hapag-Lloyd 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 Hapag Lloyd AG 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 Hapag-Lloyd i.e., Hapag-Lloyd and China Merchants go up and down completely randomly.

Pair Corralation between Hapag-Lloyd and China Merchants

Assuming the 90 days trading horizon Hapag Lloyd AG is expected to under-perform the China Merchants. In addition to that, Hapag-Lloyd is 1.16 times more volatile than China Merchants Port. It trades about -0.13 of its total potential returns per unit of risk. China Merchants Port is currently generating about -0.04 per unit of volatility. If you would invest  154.00  in China Merchants Port on September 23, 2024 and sell it today you would lose (3.00) from holding China Merchants Port or give up 1.95% of portfolio value over 90 days.

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

Hapag Lloyd AG  vs.  China Merchants Port

Hapag Lloyd AG

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hapag Lloyd AG are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Hapag-Lloyd is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

China Merchants Port

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in China Merchants Port are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, China Merchants reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hapag-Lloyd and China Merchants

The main advantage of trading using opposite Hapag-Lloyd and China Merchants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hapag-Lloyd 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 Hapag Lloyd AG 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.