Correlation Between Tainan Spinning and China Steel
Can any of the company-specific risk be diversified away by investing in both Tainan Spinning 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 Tainan Spinning and China Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tainan Spinning Co and China Steel Corp, you can compare the effects of market volatilities on Tainan Spinning 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 Tainan Spinning with a short position of China Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tainan Spinning and China Steel.
Diversification Opportunities for Tainan Spinning and China Steel
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Tainan and China is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Tainan Spinning Co 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 Tainan Spinning 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 Tainan Spinning Co 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 Tainan Spinning i.e., Tainan Spinning and China Steel go up and down completely randomly.
Pair Corralation between Tainan Spinning and China Steel
Assuming the 90 days trading horizon Tainan Spinning Co is expected to generate 1.36 times more return on investment than China Steel. However, Tainan Spinning is 1.36 times more volatile than China Steel Corp. It trades about -0.01 of its potential returns per unit of risk. China Steel Corp is currently generating about -0.06 per unit of risk. If you would invest 1,755 in Tainan Spinning Co on September 12, 2024 and sell it today you would lose (225.00) from holding Tainan Spinning Co or give up 12.82% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.79% |
| Values | Daily Returns |
Tainan Spinning Co vs. China Steel Corp
Performance |
| Timeline |
| Tainan Spinning |
| China Steel Corp |
Tainan Spinning and China Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tainan Spinning and China Steel
The main advantage of trading using opposite Tainan Spinning and China Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tainan Spinning 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.| Tainan Spinning vs. Lealea Enterprise Co | Tainan Spinning vs. China Petrochemical Development | Tainan Spinning vs. Li Peng Enterprise | Tainan Spinning vs. Oriental Union Chemical |
| China Steel vs. Tainan Spinning Co | China Steel vs. Lealea Enterprise Co | China Steel vs. China Petrochemical Development | China Steel vs. Ruentex Development 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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