Correlation Between China Steel and Pan Asia
Can any of the company-specific risk be diversified away by investing in both China Steel and Pan Asia 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 Pan Asia 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 Pan Asia Chemical, you can compare the effects of market volatilities on China Steel and Pan Asia 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 Pan Asia. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Steel and Pan Asia.
Diversification Opportunities for China Steel and Pan Asia
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between China and Pan is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding China Steel Chemical and Pan Asia Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pan Asia Chemical 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 Pan Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pan Asia Chemical has no effect on the direction of China Steel i.e., China Steel and Pan Asia go up and down completely randomly.
Pair Corralation between China Steel and Pan Asia
Assuming the 90 days trading horizon China Steel Chemical is expected to under-perform the Pan Asia. In addition to that, China Steel is 2.4 times more volatile than Pan Asia Chemical. It trades about -0.4 of its total potential returns per unit of risk. Pan Asia Chemical is currently generating about -0.45 per unit of volatility. If you would invest 1,420 in Pan Asia Chemical on October 12, 2024 and sell it today you would lose (50.00) from holding Pan Asia Chemical or give up 3.52% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Steel Chemical vs. Pan Asia Chemical
Performance |
| Timeline |
| China Steel Chemical |
| Pan Asia Chemical |
China Steel and Pan Asia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Steel and Pan Asia
The main advantage of trading using opposite China Steel and Pan Asia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Steel position performs unexpectedly, Pan Asia 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 Pan Asia will offset losses from the drop in Pan Asia'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 |
| Pan Asia vs. Coremax Corp | Pan Asia vs. Taiwan Hopax Chemsistry | Pan Asia vs. Delta Electronics | Pan Asia vs. China Steel Chemical |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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