Correlation Between Tehmag Foods and China Steel
Can any of the company-specific risk be diversified away by investing in both Tehmag Foods and China Steel 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 Tehmag Foods and China Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tehmag Foods and China Steel Corp, you can compare the effects of market volatilities on Tehmag Foods and China Steel 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 Tehmag Foods with a short position of China Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tehmag Foods and China Steel.
Diversification Opportunities for Tehmag Foods and China Steel
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Tehmag and China is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Tehmag Foods and China Steel Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Steel Corp and Tehmag Foods 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 Tehmag Foods are associated (or correlated) with China Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Steel Corp has no effect on the direction of Tehmag Foods i.e., Tehmag Foods and China Steel go up and down completely randomly.
Pair Corralation between Tehmag Foods and China Steel
Assuming the 90 days trading horizon Tehmag Foods is expected to under-perform the China Steel. In addition to that, Tehmag Foods is 1.05 times more volatile than China Steel Corp. It trades about -0.09 of its total potential returns per unit of risk. China Steel Corp is currently generating about -0.07 per unit of volatility. If you would invest 4,200 in China Steel Corp on September 1, 2024 and sell it today you would lose (25.00) from holding China Steel Corp or give up 0.6% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tehmag Foods vs. China Steel Corp
Performance |
| Timeline |
| Tehmag Foods |
| China Steel Corp |
Tehmag Foods and China Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tehmag Foods and China Steel
The main advantage of trading using opposite Tehmag Foods and China Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tehmag Foods position performs unexpectedly, China Steel 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 Steel will offset losses from the drop in China Steel's long position.| Tehmag Foods vs. Yuanta Financial Holdings | Tehmag Foods vs. Fubon Financial Holding | Tehmag Foods vs. CHINA DEVELOPMENT FINANCIAL | Tehmag Foods vs. Advanced Wireless Semiconductor |
| China Steel vs. Tainet Communication System | China Steel vs. Thinking Electronic Industrial | China Steel vs. Simple Mart Retail | China Steel vs. Tradetool Auto Co |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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