Correlation Between COSCO SHIPPING and Advance Auto

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

Diversification Opportunities for COSCO SHIPPING and Advance Auto

0.5
  Correlation Coefficient

Very weak diversification

The 3 months correlation between COSCO and Advance is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding COSCO SHIPPING HOLDINGS and Advance Auto Parts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advance Auto Parts 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 HOLDINGS are associated (or correlated) with Advance Auto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advance Auto Parts has no effect on the direction of COSCO SHIPPING i.e., COSCO SHIPPING and Advance Auto go up and down completely randomly.

Pair Corralation between COSCO SHIPPING and Advance Auto

Assuming the 90 days trading horizon COSCO SHIPPING HOLDINGS is expected to under-perform the Advance Auto. In addition to that, COSCO SHIPPING is 1.1 times more volatile than Advance Auto Parts. It trades about -0.09 of its total potential returns per unit of risk. Advance Auto Parts is currently generating about -0.03 per unit of volatility. If you would invest  18,521  in Advance Auto Parts on April 8, 2022 and sell it today you would lose (344.00)  from holding Advance Auto Parts or give up 1.86% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy80.95%
ValuesDaily Returns

COSCO SHIPPING HOLDINGS  vs.  Advance Auto Parts

 Performance (%) 
      Timeline 
COSCO SHIPPING HOLDINGS 
COSCO Performance
0 of 100
Over the last 90 days COSCO SHIPPING HOLDINGS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, COSCO SHIPPING is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

COSCO Price Channel

Advance Auto Parts 
Advance Performance
0 of 100
Over the last 90 days Advance Auto Parts 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 August 2022. The recent disarray may also be a sign of long period up-swing for the firm insiders.

Structure and Payout Changes

Forward Annual Dividend Yield
0.033
Payout Ratio
0.41
Last Split Factor
3:2
Forward Annual Dividend Rate
6.0
Dividend Date
2022-07-01
Ex Dividend Date
2022-06-16
Last Split Date
2005-09-26

Advance Price Channel

COSCO SHIPPING and Advance Auto Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with COSCO SHIPPING and Advance Auto

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

COSCO SHIPPING HOLDINGS

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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 COSCO SHIPPING 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. COSCO SHIPPING'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, COSCO SHIPPING'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 COSCO SHIPPING HOLDINGS.
The idea behind COSCO SHIPPING HOLDINGS and Advance Auto Parts 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.

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