Correlation Between China Steel and Nan Ya
Can any of the company-specific risk be diversified away by investing in both China Steel and Nan Ya 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 Nan Ya into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Steel Corp and Nan Ya Plastics, you can compare the effects of market volatilities on China Steel and Nan Ya 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 Nan Ya. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Steel and Nan Ya.
Diversification Opportunities for China Steel and Nan Ya
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between China and Nan is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding China Steel Corp and Nan Ya Plastics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nan Ya Plastics 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 Corp are associated (or correlated) with Nan Ya. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nan Ya Plastics has no effect on the direction of China Steel i.e., China Steel and Nan Ya go up and down completely randomly.
Pair Corralation between China Steel and Nan Ya
Assuming the 90 days trading horizon China Steel Corp is expected to generate 0.75 times more return on investment than Nan Ya. However, China Steel Corp is 1.34 times less risky than Nan Ya. It trades about -0.06 of its potential returns per unit of risk. Nan Ya Plastics is currently generating about -0.11 per unit of risk. If you would invest 2,975 in China Steel Corp on August 24, 2024 and sell it today you would lose (765.00) from holding China Steel Corp or give up 25.71% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.75% |
| Values | Daily Returns |
China Steel Corp vs. Nan Ya Plastics
Performance |
| Timeline |
| China Steel Corp |
| Nan Ya Plastics |
China Steel and Nan Ya Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Steel and Nan Ya
The main advantage of trading using opposite China Steel and Nan Ya positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Steel position performs unexpectedly, Nan Ya 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 Nan Ya will offset losses from the drop in Nan Ya's long position.| China Steel vs. Cheng Shin Rubber | China Steel vs. TSRC Corp | China Steel vs. Taiwan Cement Corp | China Steel vs. China Steel Chemical |
| Nan Ya vs. Cheng Shin Rubber | Nan Ya vs. TSRC Corp | Nan Ya vs. Taiwan Cement Corp | Nan Ya vs. China Steel Chemical |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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