Correlation Between USI Corp and China Steel
Can any of the company-specific risk be diversified away by investing in both USI Corp 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 USI Corp and China Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between USI Corp and China Steel Chemical, you can compare the effects of market volatilities on USI Corp 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 USI Corp with a short position of China Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of USI Corp and China Steel.
Diversification Opportunities for USI Corp and China Steel
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between USI and China is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding USI Corp and China Steel Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Steel Chemical and USI Corp 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 USI Corp 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 Chemical has no effect on the direction of USI Corp i.e., USI Corp and China Steel go up and down completely randomly.
Pair Corralation between USI Corp and China Steel
Assuming the 90 days trading horizon USI Corp is expected to under-perform the China Steel. In addition to that, USI Corp is 1.64 times more volatile than China Steel Chemical. It trades about -0.08 of its total potential returns per unit of risk. China Steel Chemical is currently generating about -0.07 per unit of volatility. If you would invest 12,150 in China Steel Chemical on September 1, 2024 and sell it today you would lose (2,440) from holding China Steel Chemical or give up 20.08% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
USI Corp vs. China Steel Chemical
Performance |
| Timeline |
| USI Corp |
| China Steel Chemical |
USI Corp and China Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with USI Corp and China Steel
The main advantage of trading using opposite USI Corp and China Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if USI Corp 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.| USI Corp vs. Basso Industry Corp | USI Corp vs. Chung Hsin Electric Machinery | USI Corp vs. TYC Brother Industrial | USI Corp vs. TECO Electric Machinery |
| China Steel vs. Formosa Chemicals Fibre | China Steel vs. Formosa Plastics Corp | China Steel vs. Cheng Shin Rubber | China Steel vs. President Chain Store |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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