Correlation Between China Steel and Pou Chen
Can any of the company-specific risk be diversified away by investing in both China Steel and Pou Chen 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 Pou Chen 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 Pou Chen Corp, you can compare the effects of market volatilities on China Steel and Pou Chen 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 Pou Chen. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Steel and Pou Chen.
Diversification Opportunities for China Steel and Pou Chen
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between China and Pou is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding China Steel Chemical and Pou Chen Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pou Chen 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 Pou Chen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pou Chen Corp has no effect on the direction of China Steel i.e., China Steel and Pou Chen go up and down completely randomly.
Pair Corralation between China Steel and Pou Chen
Assuming the 90 days trading horizon China Steel Chemical is expected to under-perform the Pou Chen. But the stock apears to be less risky and, when comparing its historical volatility, China Steel Chemical is 1.88 times less risky than Pou Chen. The stock trades about -0.1 of its potential returns per unit of risk. The Pou Chen Corp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 3,720 in Pou Chen Corp on August 31, 2024 and sell it today you would earn a total of 360.00 from holding Pou Chen Corp or generate 9.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Steel Chemical vs. Pou Chen Corp
Performance |
| Timeline |
| China Steel Chemical |
| Pou Chen Corp |
China Steel and Pou Chen Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Steel and Pou Chen
The main advantage of trading using opposite China Steel and Pou Chen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Steel position performs unexpectedly, Pou Chen 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 Pou Chen will offset losses from the drop in Pou Chen'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 |
| Pou Chen vs. Uni President Enterprises Corp | Pou Chen vs. Cheng Shin Rubber | Pou Chen vs. Far Eastern New | Pou Chen vs. Formosa Chemicals Fibre |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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