Correlation Between China Steel and Test Research
Can any of the company-specific risk be diversified away by investing in both China Steel and Test Research 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 Test Research 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 Test Research, you can compare the effects of market volatilities on China Steel and Test Research 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 Test Research. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Steel and Test Research.
Diversification Opportunities for China Steel and Test Research
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between China and Test is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding China Steel Chemical and Test Research in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Test Research 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 Test Research. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Test Research has no effect on the direction of China Steel i.e., China Steel and Test Research go up and down completely randomly.
Pair Corralation between China Steel and Test Research
Assuming the 90 days trading horizon China Steel is expected to generate 1.83 times less return on investment than Test Research. But when comparing it to its historical volatility, China Steel Chemical is 4.06 times less risky than Test Research. It trades about 0.05 of its potential returns per unit of risk. Test Research is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 13,650 in Test Research on August 29, 2024 and sell it today you would earn a total of 50.00 from holding Test Research or generate 0.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Steel Chemical vs. Test Research
Performance |
| Timeline |
| China Steel Chemical |
| Test Research |
China Steel and Test Research Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Steel and Test Research
The main advantage of trading using opposite China Steel and Test Research positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Steel position performs unexpectedly, Test Research 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 Test Research will offset losses from the drop in Test Research's long position.The idea behind China Steel Chemical and Test Research 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.| Test Research vs. Novatek Microelectronics Corp | Test Research vs. Sitronix Technology Corp | Test Research vs. Elan Microelectronics Corp | Test Research vs. Global Unichip Corp |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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