Correlation Between China Steel and IBF Financial
Can any of the company-specific risk be diversified away by investing in both China Steel and IBF Financial 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 IBF Financial 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 IBF Financial Holdings, you can compare the effects of market volatilities on China Steel and IBF Financial 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 IBF Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Steel and IBF Financial.
Diversification Opportunities for China Steel and IBF Financial
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between China and IBF is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding China Steel Chemical and IBF Financial Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IBF Financial Holdings 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 IBF Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IBF Financial Holdings has no effect on the direction of China Steel i.e., China Steel and IBF Financial go up and down completely randomly.
Pair Corralation between China Steel and IBF Financial
Assuming the 90 days trading horizon China Steel Chemical is expected to under-perform the IBF Financial. But the stock apears to be less risky and, when comparing its historical volatility, China Steel Chemical is 1.23 times less risky than IBF Financial. The stock trades about -0.01 of its potential returns per unit of risk. The IBF Financial Holdings is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1,140 in IBF Financial Holdings on August 30, 2024 and sell it today you would earn a total of 305.00 from holding IBF Financial Holdings or generate 26.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Steel Chemical vs. IBF Financial Holdings
Performance |
| Timeline |
| China Steel Chemical |
| IBF Financial Holdings |
China Steel and IBF Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Steel and IBF Financial
The main advantage of trading using opposite China Steel and IBF Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Steel position performs unexpectedly, IBF Financial 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 IBF Financial will offset losses from the drop in IBF Financial'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 |
| IBF Financial vs. Taiwan Secom Co | IBF Financial vs. TTET Union Corp | IBF Financial vs. China Steel Chemical | IBF Financial vs. Taiwan Shin Kong |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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