Correlation Between Golden Ocean and China Merchants
Can any of the company-specific risk be diversified away by investing in both Golden Ocean 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 Golden Ocean and China Merchants into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Golden Ocean Group and China Merchants Port, you can compare the effects of market volatilities on Golden Ocean 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 Golden Ocean with a short position of China Merchants. Check out your portfolio center. Please also check ongoing floating volatility patterns of Golden Ocean and China Merchants.
Diversification Opportunities for Golden Ocean and China Merchants
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Golden and China is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Golden Ocean Group 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 Golden Ocean 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 Golden Ocean Group 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 Golden Ocean i.e., Golden Ocean and China Merchants go up and down completely randomly.
Pair Corralation between Golden Ocean and China Merchants
Given the investment horizon of 90 days Golden Ocean is expected to generate 3.3 times less return on investment than China Merchants. But when comparing it to its historical volatility, Golden Ocean Group is 2.42 times less risky than China Merchants. It trades about 0.03 of its potential returns per unit of risk. China Merchants Port is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1,144 in China Merchants Port on September 3, 2024 and sell it today you would earn a total of 474.00 from holding China Merchants Port or generate 41.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 64.44% |
| Values | Daily Returns |
Golden Ocean Group vs. China Merchants Port
Performance |
| Timeline |
| Golden Ocean Group |
| China Merchants Port |
Golden Ocean and China Merchants Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Golden Ocean and China Merchants
The main advantage of trading using opposite Golden Ocean and China Merchants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Golden Ocean 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.| Golden Ocean vs. Genco Shipping Trading | Golden Ocean vs. Global Ship Lease | Golden Ocean vs. Diana Shipping | Golden Ocean vs. Star Bulk Carriers |
| China Merchants vs. Genco Shipping Trading | China Merchants vs. Golden Ocean Group | China Merchants vs. Star Bulk Carriers | China Merchants vs. Oceanpal |
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 the Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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