Correlation Between China Steel and Kung Long
Can any of the company-specific risk be diversified away by investing in both China Steel and Kung Long 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 Kung Long 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 Kung Long Batteries, you can compare the effects of market volatilities on China Steel and Kung Long 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 Kung Long. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Steel and Kung Long.
Diversification Opportunities for China Steel and Kung Long
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between China and Kung is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding China Steel Chemical and Kung Long Batteries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kung Long Batteries 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 Kung Long. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kung Long Batteries has no effect on the direction of China Steel i.e., China Steel and Kung Long go up and down completely randomly.
Pair Corralation between China Steel and Kung Long
Assuming the 90 days trading horizon China Steel Chemical is expected to generate 1.14 times more return on investment than Kung Long. However, China Steel is 1.14 times more volatile than Kung Long Batteries. It trades about -0.02 of its potential returns per unit of risk. Kung Long Batteries is currently generating about -0.12 per unit of risk. If you would invest 9,270 in China Steel Chemical on October 26, 2024 and sell it today you would lose (40.00) from holding China Steel Chemical or give up 0.43% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Steel Chemical vs. Kung Long Batteries
Performance |
| Timeline |
| China Steel Chemical |
| Kung Long Batteries |
China Steel and Kung Long Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Steel and Kung Long
The main advantage of trading using opposite China Steel and Kung Long positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Steel position performs unexpectedly, Kung Long 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 Kung Long will offset losses from the drop in Kung Long's long position.| China Steel vs. Formosa Chemicals Fibre | China Steel vs. Formosa Plastics Corp | China Steel vs. Cheng Shin Rubber | China Steel vs. President Chain Store |
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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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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