Correlation Between Shanghai and COSCO SHIPPING

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Shanghai and COSCO SHIPPING 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 Shanghai and COSCO SHIPPING into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shanghai and COSCO SHIPPING HOLDINGS, you can compare the effects of market volatilities on Shanghai and COSCO SHIPPING 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 Shanghai with a short position of COSCO SHIPPING. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shanghai and COSCO SHIPPING.

Diversification Opportunities for Shanghai and COSCO SHIPPING

0.87
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Shanghai and COSCO is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai and COSCO SHIPPING HOLDINGS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COSCO SHIPPING HOLDINGS and Shanghai 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 Shanghai are associated (or correlated) with COSCO SHIPPING. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COSCO SHIPPING HOLDINGS has no effect on the direction of Shanghai i.e., Shanghai and COSCO SHIPPING go up and down completely randomly.
    Optimize

Pair Corralation between Shanghai and COSCO SHIPPING

Assuming the 90 days trading horizon Shanghai is expected to generate 2.56 times less return on investment than COSCO SHIPPING. But when comparing it to its historical volatility, Shanghai is 1.91 times less risky than COSCO SHIPPING. It trades about 0.22 of its potential returns per unit of risk. COSCO SHIPPING HOLDINGS is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  1,145  in COSCO SHIPPING HOLDINGS on August 30, 2022 and sell it today you would earn a total of  98.00  from holding COSCO SHIPPING HOLDINGS or generate 8.56% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy89.47%
ValuesDaily Returns

Shanghai  vs.  COSCO SHIPPING HOLDINGS

 Performance (%) 
       Timeline  

Shanghai and COSCO SHIPPING Volatility Contrast

   Predicted Return Density   
       Returns  

Shanghai

Pair trading matchups for Shanghai

The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against Shanghai as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. Shanghai's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, Shanghai's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to Shanghai.

Pair Trading with Shanghai and COSCO SHIPPING

The main advantage of trading using opposite Shanghai and COSCO SHIPPING positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shanghai position performs unexpectedly, COSCO SHIPPING 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 COSCO SHIPPING will offset losses from the drop in COSCO SHIPPING's long position.
The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against Shanghai as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. Shanghai's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, Shanghai's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to Shanghai.
The idea behind Shanghai and COSCO SHIPPING HOLDINGS 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.
COSCO SHIPPING vs. GANFENG LITHIUM CO
COSCO SHIPPING vs. CHONG QING CHANGAN
COSCO SHIPPING vs. CHONG QING CHANGAN
COSCO SHIPPING vs. CHINA INTL MARINE
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.

Other Complementary Tools

Equity Analysis
Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities
Go
Idea Optimizer
Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio
Go
Stock Tickers
Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites
Go
Portfolio Volatility
Check portfolio volatility and analyze historical return density to properly model market risk
Go
Alpha Finder
Use alpha and beta coefficients to find investment opportunities after accounting for the risk
Go
Analyst Recommendations
Analyst recommendations and target price estimates broken down by several categories
Go
Insider Screener
Find insiders across different sectors to evaluate their impact on performance
Go
Stock Tickers
Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites
Go
Aroon Oscillator
Analyze current equity momentum using Aroon Oscillator and other momentum ratios
Go
Headlines Timeline
Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity
Go
Price Ceiling Movement
Calculate and plot Price Ceiling Movement for different equity instruments
Go
Volatility Analysis
Get historical volatility and risk analysis based on latest market data
Go