Correlation Between China Steel and Sunny Friend
Can any of the company-specific risk be diversified away by investing in both China Steel and Sunny Friend 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 Sunny Friend 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 Sunny Friend Environmental, you can compare the effects of market volatilities on China Steel and Sunny Friend 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 Sunny Friend. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Steel and Sunny Friend.
Diversification Opportunities for China Steel and Sunny Friend
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between China and Sunny is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding China Steel Chemical and Sunny Friend Environmental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sunny Friend Environ 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 Sunny Friend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sunny Friend Environ has no effect on the direction of China Steel i.e., China Steel and Sunny Friend go up and down completely randomly.
Pair Corralation between China Steel and Sunny Friend
Assuming the 90 days trading horizon China Steel Chemical is expected to generate 0.45 times more return on investment than Sunny Friend. However, China Steel Chemical is 2.21 times less risky than Sunny Friend. It trades about 0.05 of its potential returns per unit of risk. Sunny Friend Environmental is currently generating about -0.1 per unit of risk. If you would invest 9,810 in China Steel Chemical on August 29, 2024 and sell it today you would earn a total of 80.00 from holding China Steel Chemical or generate 0.82% 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. Sunny Friend Environmental
Performance |
| Timeline |
| China Steel Chemical |
| Sunny Friend Environ |
China Steel and Sunny Friend Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Steel and Sunny Friend
The main advantage of trading using opposite China Steel and Sunny Friend positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Steel position performs unexpectedly, Sunny Friend 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 Sunny Friend will offset losses from the drop in Sunny Friend'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 |
| Sunny Friend vs. Cleanaway Co | Sunny Friend vs. Taiwan Secom Co | Sunny Friend vs. ECOVE Environment Corp | Sunny Friend vs. TTET Union 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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