Correlation Between China Steel and Union Bank
Can any of the company-specific risk be diversified away by investing in both China Steel and Union Bank 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 Union Bank 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 Union Bank of, you can compare the effects of market volatilities on China Steel and Union Bank 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 Union Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Steel and Union Bank.
Diversification Opportunities for China Steel and Union Bank
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between China and Union is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding China Steel Chemical and Union Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Union Bank 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 Union Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Union Bank has no effect on the direction of China Steel i.e., China Steel and Union Bank go up and down completely randomly.
Pair Corralation between China Steel and Union Bank
Assuming the 90 days trading horizon China Steel Chemical is expected to under-perform the Union Bank. But the stock apears to be less risky and, when comparing its historical volatility, China Steel Chemical is 1.01 times less risky than Union Bank. The stock trades about -0.03 of its potential returns per unit of risk. The Union Bank of is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 1,615 in Union Bank of on November 27, 2024 and sell it today you would lose (60.00) from holding Union Bank of or give up 3.72% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.79% |
| Values | Daily Returns |
China Steel Chemical vs. Union Bank of
Performance |
| Timeline |
| China Steel Chemical |
| Union Bank |
China Steel and Union Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Steel and Union Bank
The main advantage of trading using opposite China Steel and Union Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Steel position performs unexpectedly, Union Bank 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 Union Bank will offset losses from the drop in Union Bank'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 |
| Union Bank vs. First Financial Holding | Union Bank vs. Taishin Financial Holding | Union Bank vs. CTBC Financial Holding | Union Bank vs. Mega Financial Holding |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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