Correlation Between China Steel and First Insurance
Can any of the company-specific risk be diversified away by investing in both China Steel and First Insurance 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 First Insurance 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 First Insurance Co, you can compare the effects of market volatilities on China Steel and First Insurance 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 First Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Steel and First Insurance.
Diversification Opportunities for China Steel and First Insurance
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between China and First is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding China Steel Chemical and First Insurance Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Insurance 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 First Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Insurance has no effect on the direction of China Steel i.e., China Steel and First Insurance go up and down completely randomly.
Pair Corralation between China Steel and First Insurance
Assuming the 90 days trading horizon China Steel Chemical is expected to under-perform the First Insurance. But the stock apears to be less risky and, when comparing its historical volatility, China Steel Chemical is 1.55 times less risky than First Insurance. The stock trades about -0.1 of its potential returns per unit of risk. The First Insurance Co is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 2,505 in First Insurance Co on September 1, 2024 and sell it today you would lose (20.00) from holding First Insurance Co or give up 0.8% 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. First Insurance Co
Performance |
| Timeline |
| China Steel Chemical |
| First Insurance |
China Steel and First Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Steel and First Insurance
The main advantage of trading using opposite China Steel and First Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Steel position performs unexpectedly, First Insurance 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 First Insurance will offset losses from the drop in First Insurance'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 |
| First Insurance vs. EnTie Commercial Bank | First Insurance vs. Union Bank of | First Insurance vs. Bank of Kaohsiung | First Insurance vs. Taiwan Business Bank |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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