Correlation Between Star Bulk and China Merchants
Can any of the company-specific risk be diversified away by investing in both Star Bulk 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 Star Bulk and China Merchants into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Star Bulk Carriers and China Merchants Port, you can compare the effects of market volatilities on Star Bulk 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 Star Bulk with a short position of China Merchants. Check out your portfolio center. Please also check ongoing floating volatility patterns of Star Bulk and China Merchants.
Diversification Opportunities for Star Bulk and China Merchants
-0.49 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Star and China is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Star Bulk Carriers 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 Star Bulk 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 Star Bulk Carriers 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 Star Bulk i.e., Star Bulk and China Merchants go up and down completely randomly.
Pair Corralation between Star Bulk and China Merchants
Given the investment horizon of 90 days Star Bulk is expected to generate 11.14 times less return on investment than China Merchants. But when comparing it to its historical volatility, Star Bulk Carriers is 2.66 times less risky than China Merchants. It trades about 0.01 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 | Very Weak |
| Accuracy | 64.44% |
| Values | Daily Returns |
Star Bulk Carriers vs. China Merchants Port
Performance |
| Timeline |
| Star Bulk Carriers |
| China Merchants Port |
Star Bulk and China Merchants Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Star Bulk and China Merchants
The main advantage of trading using opposite Star Bulk and China Merchants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Star Bulk 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.| Star Bulk vs. Golden Ocean Group | Star Bulk vs. TOP Ships | Star Bulk vs. Seanergy Maritime Holdings | Star Bulk vs. Euroseas |
| 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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