Correlation Between China Steel and Taiwan Hon
Can any of the company-specific risk be diversified away by investing in both China Steel and Taiwan Hon 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 Taiwan Hon 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 Taiwan Hon Chuan, you can compare the effects of market volatilities on China Steel and Taiwan Hon 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 Taiwan Hon. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Steel and Taiwan Hon.
Diversification Opportunities for China Steel and Taiwan Hon
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between China and Taiwan is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding China Steel Chemical and Taiwan Hon Chuan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Hon Chuan 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 Taiwan Hon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Hon Chuan has no effect on the direction of China Steel i.e., China Steel and Taiwan Hon go up and down completely randomly.
Pair Corralation between China Steel and Taiwan Hon
Assuming the 90 days trading horizon China Steel Chemical is expected to generate 0.71 times more return on investment than Taiwan Hon. However, China Steel Chemical is 1.41 times less risky than Taiwan Hon. It trades about 0.01 of its potential returns per unit of risk. Taiwan Hon Chuan is currently generating about -0.13 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 Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
China Steel Chemical vs. Taiwan Hon Chuan
Performance |
| Timeline |
| China Steel Chemical |
| Taiwan Hon Chuan |
China Steel and Taiwan Hon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Steel and Taiwan Hon
The main advantage of trading using opposite China Steel and Taiwan Hon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Steel position performs unexpectedly, Taiwan Hon 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 Taiwan Hon will offset losses from the drop in Taiwan Hon'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 |
| Taiwan Hon vs. Connection Technology Systems | Taiwan Hon vs. Nova Technology | Taiwan Hon vs. Advanced Wireless Semiconductor | Taiwan Hon vs. STL Technology Co |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
Other Complementary Tools
| FinTech Suite Use AI to screen and filter profitable investment opportunities | |
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
| Equity Analysis Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities | |
| Companies Directory Evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals | |
| Odds Of Bankruptcy Get analysis of equity chance of financial distress in the next 2 years |