Correlation Between China Steel and China Man
Can any of the company-specific risk be diversified away by investing in both China Steel and China Man 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 China Man 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 China Man Made Fiber, you can compare the effects of market volatilities on China Steel and China Man 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 China Man. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Steel and China Man.
Diversification Opportunities for China Steel and China Man
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between China and China is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding China Steel Chemical and China Man Made Fiber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Man Made 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 China Man. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Man Made has no effect on the direction of China Steel i.e., China Steel and China Man go up and down completely randomly.
Pair Corralation between China Steel and China Man
Assuming the 90 days trading horizon China Steel Chemical is expected to under-perform the China Man. But the stock apears to be less risky and, when comparing its historical volatility, China Steel Chemical is 1.08 times less risky than China Man. The stock trades about -0.01 of its potential returns per unit of risk. The China Man Made Fiber is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 781.00 in China Man Made Fiber on August 26, 2024 and sell it today you would earn a total of 31.00 from holding China Man Made Fiber or generate 3.97% 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. China Man Made Fiber
Performance |
| Timeline |
| China Steel Chemical |
| China Man Made |
China Steel and China Man Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Steel and China Man
The main advantage of trading using opposite China Steel and China Man positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Steel position performs unexpectedly, China Man 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 Man will offset losses from the drop in China Man'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 |
| China Man vs. Cheng Shin Rubber | China Man vs. Taiwan Cement Corp | China Man vs. China Steel Chemical | China Man 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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