Correlation Between China Merchants and Nippon Yusen

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

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

Diversification Opportunities for China Merchants and Nippon Yusen

0.75

Correlation Coefficient

China Merchants  Nippon Yusen

Poor diversification

The 3 months correlation between China and Nippon is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding China Merchants Port and Nippon Yusen Kabushiki in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nippon Yusen Kabushiki and China Merchants 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 China Merchants Port are associated (or correlated) with Nippon Yusen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nippon Yusen Kabushiki has no effect on the direction of China Merchants i.e., China Merchants and Nippon Yusen go up and down completely randomly.

Pair Corralation between China Merchants and Nippon Yusen

If you would invest  544.00  in Nippon Yusen Kabushiki on January 24, 2024 and sell it today you would earn a total of  2.00  from holding Nippon Yusen Kabushiki or generate 0.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

China Merchants Port  vs.  Nippon Yusen Kabushiki

China Merchants Port

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Merchants Port has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's technical indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Nippon Yusen Kabushiki

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nippon Yusen Kabushiki 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 fairly strong which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with China Merchants and Nippon Yusen

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

The idea behind China Merchants Port and Nippon Yusen Kabushiki 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.