Correlation Between China Steel and Shanghai Commercial
Can any of the company-specific risk be diversified away by investing in both China Steel and Shanghai Commercial 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 Shanghai Commercial 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 Shanghai Commercial Savings, you can compare the effects of market volatilities on China Steel and Shanghai Commercial 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 Shanghai Commercial. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Steel and Shanghai Commercial.
Diversification Opportunities for China Steel and Shanghai Commercial
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between China and Shanghai is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding China Steel Chemical and Shanghai Commercial Savings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Commercial 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 Shanghai Commercial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Commercial has no effect on the direction of China Steel i.e., China Steel and Shanghai Commercial go up and down completely randomly.
Pair Corralation between China Steel and Shanghai Commercial
Assuming the 90 days trading horizon China Steel Chemical is expected to generate 0.74 times more return on investment than Shanghai Commercial. However, China Steel Chemical is 1.35 times less risky than Shanghai Commercial. It trades about 0.01 of its potential returns per unit of risk. Shanghai Commercial Savings is currently generating about -0.07 per unit of risk. If you would invest 9,690 in China Steel Chemical on September 1, 2024 and sell it today you would earn a total of 20.00 from holding China Steel Chemical or generate 0.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Steel Chemical vs. Shanghai Commercial Savings
Performance |
| Timeline |
| China Steel Chemical |
| Shanghai Commercial |
China Steel and Shanghai Commercial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Steel and Shanghai Commercial
The main advantage of trading using opposite China Steel and Shanghai Commercial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Steel position performs unexpectedly, Shanghai Commercial 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 Shanghai Commercial will offset losses from the drop in Shanghai Commercial'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 |
| Shanghai Commercial vs. Central Reinsurance Corp | Shanghai Commercial vs. Huaku Development Co | Shanghai Commercial vs. Fubon Financial Holding |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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