Correlation Between China Steel and Chung Hsin
Can any of the company-specific risk be diversified away by investing in both China Steel and Chung Hsin 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 Chung Hsin 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 Chung Hsin Electric Machinery, you can compare the effects of market volatilities on China Steel and Chung Hsin 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 Chung Hsin. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Steel and Chung Hsin.
Diversification Opportunities for China Steel and Chung Hsin
0.19 | Correlation Coefficient |
Average diversification
The 3 months correlation between China and Chung is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding China Steel Corp and Chung Hsin Electric Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chung Hsin Electric 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 Chung Hsin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chung Hsin Electric has no effect on the direction of China Steel i.e., China Steel and Chung Hsin go up and down completely randomly.
Pair Corralation between China Steel and Chung Hsin
Assuming the 90 days trading horizon China Steel Corp is expected to under-perform the Chung Hsin. But the stock apears to be less risky and, when comparing its historical volatility, China Steel Corp is 2.6 times less risky than Chung Hsin. The stock trades about -0.04 of its potential returns per unit of risk. The Chung Hsin Electric Machinery is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 6,370 in Chung Hsin Electric Machinery on August 30, 2024 and sell it today you would earn a total of 9,730 from holding Chung Hsin Electric Machinery or generate 152.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.79% |
| Values | Daily Returns |
China Steel Corp vs. Chung Hsin Electric Machinery
Performance |
| Timeline |
| China Steel Corp |
| Chung Hsin Electric |
China Steel and Chung Hsin Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Steel and Chung Hsin
The main advantage of trading using opposite China Steel and Chung Hsin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Steel position performs unexpectedly, Chung Hsin 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 Chung Hsin will offset losses from the drop in Chung Hsin's long position.| China Steel vs. Formosa Plastics Corp | China Steel vs. Chunghwa Telecom Co | China Steel vs. Nan Ya Plastics | China Steel vs. Cathay Financial Holding |
| Chung Hsin vs. Yulon Motor Co | Chung Hsin vs. Far Eastern Department | Chung Hsin vs. China Steel Corp | Chung Hsin vs. Chang Hwa Commercial |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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