Correlation Between China Steel and Mechema Chemicals
Can any of the company-specific risk be diversified away by investing in both China Steel and Mechema Chemicals 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 Mechema Chemicals 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 Mechema Chemicals Int, you can compare the effects of market volatilities on China Steel and Mechema Chemicals 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 Mechema Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Steel and Mechema Chemicals.
Diversification Opportunities for China Steel and Mechema Chemicals
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between China and Mechema is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding China Steel Chemical and Mechema Chemicals Int in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mechema Chemicals Int 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 Mechema Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mechema Chemicals Int has no effect on the direction of China Steel i.e., China Steel and Mechema Chemicals go up and down completely randomly.
Pair Corralation between China Steel and Mechema Chemicals
Assuming the 90 days trading horizon China Steel Chemical is expected to generate 0.57 times more return on investment than Mechema Chemicals. However, China Steel Chemical is 1.77 times less risky than Mechema Chemicals. It trades about -0.01 of its potential returns per unit of risk. Mechema Chemicals Int is currently generating about -0.03 per unit of risk. If you would invest 10,600 in China Steel Chemical on August 30, 2024 and sell it today you would lose (900.00) from holding China Steel Chemical or give up 8.49% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Steel Chemical vs. Mechema Chemicals Int
Performance |
| Timeline |
| China Steel Chemical |
| Mechema Chemicals Int |
China Steel and Mechema Chemicals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Steel and Mechema Chemicals
The main advantage of trading using opposite China Steel and Mechema Chemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Steel position performs unexpectedly, Mechema Chemicals 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 Mechema Chemicals will offset losses from the drop in Mechema Chemicals' 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 |
| Mechema Chemicals vs. Nantex Industry Co | Mechema Chemicals vs. Chong Hong Construction | Mechema Chemicals vs. Cleanaway Co | Mechema Chemicals vs. Symtek Automation Asia |
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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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