Correlation Between China Steel and Hsing Ta
Can any of the company-specific risk be diversified away by investing in both China Steel and Hsing Ta 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 China Steel and Hsing Ta into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Steel Chemical and Hsing Ta Cement, you can compare the effects of market volatilities on China Steel and Hsing Ta 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 China Steel with a short position of Hsing Ta. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Steel and Hsing Ta.
Diversification Opportunities for China Steel and Hsing Ta
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between China and Hsing is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding China Steel Chemical and Hsing Ta Cement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hsing Ta Cement and China Steel 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 China Steel Chemical are associated (or correlated) with Hsing Ta. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hsing Ta Cement has no effect on the direction of China Steel i.e., China Steel and Hsing Ta go up and down completely randomly.
Pair Corralation between China Steel and Hsing Ta
Assuming the 90 days trading horizon China Steel Chemical is expected to under-perform the Hsing Ta. In addition to that, China Steel is 1.08 times more volatile than Hsing Ta Cement. It trades about -0.02 of its total potential returns per unit of risk. Hsing Ta Cement is currently generating about 0.03 per unit of volatility. If you would invest 1,655 in Hsing Ta Cement on August 26, 2024 and sell it today you would earn a total of 190.00 from holding Hsing Ta Cement or generate 11.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Steel Chemical vs. Hsing Ta Cement
Performance |
| Timeline |
| China Steel Chemical |
| Hsing Ta Cement |
China Steel and Hsing Ta Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Steel and Hsing Ta
The main advantage of trading using opposite China Steel and Hsing Ta positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Steel position performs unexpectedly, Hsing Ta 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 Hsing Ta will offset losses from the drop in Hsing Ta's long position.The idea behind China Steel Chemical and Hsing Ta Cement pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Hsing Ta vs. Cheng Shin Rubber | Hsing Ta vs. Taiwan Cement Corp | Hsing Ta vs. China Steel Chemical | Hsing Ta vs. Yulon Motor 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
Other Complementary Tools
| Insider Screener Find insiders across different sectors to evaluate their impact on performance | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Headlines Timeline Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity | |
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. | |
| Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital |