Correlation Between China Steel and Sheng Yu
Can any of the company-specific risk be diversified away by investing in both China Steel and Sheng Yu 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 Sheng Yu 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 Sheng Yu Steel, you can compare the effects of market volatilities on China Steel and Sheng Yu 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 Sheng Yu. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Steel and Sheng Yu.
Diversification Opportunities for China Steel and Sheng Yu
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between China and Sheng is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding China Steel Chemical and Sheng Yu Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sheng Yu Steel 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 Sheng Yu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sheng Yu Steel has no effect on the direction of China Steel i.e., China Steel and Sheng Yu go up and down completely randomly.
Pair Corralation between China Steel and Sheng Yu
Assuming the 90 days trading horizon China Steel Chemical is expected to under-perform the Sheng Yu. But the stock apears to be less risky and, when comparing its historical volatility, China Steel Chemical is 1.06 times less risky than Sheng Yu. The stock trades about -0.03 of its potential returns per unit of risk. The Sheng Yu Steel is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 2,515 in Sheng Yu Steel on August 26, 2024 and sell it today you would lose (5.00) from holding Sheng Yu Steel or give up 0.2% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Steel Chemical vs. Sheng Yu Steel
Performance |
| Timeline |
| China Steel Chemical |
| Sheng Yu Steel |
China Steel and Sheng Yu Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Steel and Sheng Yu
The main advantage of trading using opposite China Steel and Sheng Yu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Steel position performs unexpectedly, Sheng Yu 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 Sheng Yu will offset losses from the drop in Sheng Yu's long position.The idea behind China Steel Chemical and Sheng Yu Steel 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.| Sheng Yu vs. Cheng Shin Rubber | Sheng Yu vs. Taiwan Cement Corp | Sheng Yu vs. China Steel Chemical | Sheng Yu 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 Transaction History module to view history of all your transactions and understand their impact on performance.
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