Correlation Between China Steel and Everlight Chemical
Can any of the company-specific risk be diversified away by investing in both China Steel and Everlight Chemical 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 Everlight Chemical 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 Everlight Chemical Industrial, you can compare the effects of market volatilities on China Steel and Everlight Chemical 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 Everlight Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Steel and Everlight Chemical.
Diversification Opportunities for China Steel and Everlight Chemical
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between China and Everlight is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding China Steel Chemical and Everlight Chemical Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Everlight Chemical 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 Everlight Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Everlight Chemical has no effect on the direction of China Steel i.e., China Steel and Everlight Chemical go up and down completely randomly.
Pair Corralation between China Steel and Everlight Chemical
Assuming the 90 days trading horizon China Steel Chemical is expected to generate 0.52 times more return on investment than Everlight Chemical. However, China Steel Chemical is 1.94 times less risky than Everlight Chemical. It trades about -0.01 of its potential returns per unit of risk. Everlight Chemical Industrial is currently generating about -0.24 per unit of risk. If you would invest 9,770 in China Steel Chemical on August 26, 2024 and sell it today you would lose (20.00) from holding China Steel Chemical or give up 0.2% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Steel Chemical vs. Everlight Chemical Industrial
Performance |
| Timeline |
| China Steel Chemical |
| Everlight Chemical |
China Steel and Everlight Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Steel and Everlight Chemical
The main advantage of trading using opposite China Steel and Everlight Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Steel position performs unexpectedly, Everlight Chemical 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 Everlight Chemical will offset losses from the drop in Everlight Chemical'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 |
| Everlight Chemical vs. Cheng Shin Rubber | Everlight Chemical vs. Taiwan Cement Corp | Everlight Chemical vs. China Steel Chemical | Everlight Chemical 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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