Correlation Between China Steel and Capital Securities
Can any of the company-specific risk be diversified away by investing in both China Steel and Capital Securities 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 Capital Securities 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 Capital Securities Corp, you can compare the effects of market volatilities on China Steel and Capital Securities 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 Capital Securities. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Steel and Capital Securities.
Diversification Opportunities for China Steel and Capital Securities
-0.14 | Correlation Coefficient |
Good diversification
The 3 months correlation between China and Capital is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding China Steel Chemical and Capital Securities Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Securities Corp 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 Capital Securities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Securities Corp has no effect on the direction of China Steel i.e., China Steel and Capital Securities go up and down completely randomly.
Pair Corralation between China Steel and Capital Securities
Assuming the 90 days trading horizon China Steel is expected to generate 8.3 times less return on investment than Capital Securities. But when comparing it to its historical volatility, China Steel Chemical is 1.22 times less risky than Capital Securities. It trades about 0.01 of its potential returns per unit of risk. Capital Securities Corp is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 2,230 in Capital Securities Corp on September 1, 2024 and sell it today you would earn a total of 55.00 from holding Capital Securities Corp or generate 2.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
China Steel Chemical vs. Capital Securities Corp
Performance |
| Timeline |
| China Steel Chemical |
| Capital Securities Corp |
China Steel and Capital Securities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Steel and Capital Securities
The main advantage of trading using opposite China Steel and Capital Securities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Steel position performs unexpectedly, Capital Securities 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 Capital Securities will offset losses from the drop in Capital Securities' 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 |
| Capital Securities vs. Central Reinsurance Corp | Capital Securities vs. Huaku Development Co | Capital Securities 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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