Correlation Between China Steel and Oriental Union
Can any of the company-specific risk be diversified away by investing in both China Steel and Oriental Union 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 Oriental Union 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 Oriental Union Chemical, you can compare the effects of market volatilities on China Steel and Oriental Union 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 Oriental Union. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Steel and Oriental Union.
Diversification Opportunities for China Steel and Oriental Union
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between China and Oriental is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding China Steel Corp and Oriental Union Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oriental Union Chemical 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 Oriental Union. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oriental Union Chemical has no effect on the direction of China Steel i.e., China Steel and Oriental Union go up and down completely randomly.
Pair Corralation between China Steel and Oriental Union
Assuming the 90 days trading horizon China Steel Corp is expected to generate 1.33 times more return on investment than Oriental Union. However, China Steel is 1.33 times more volatile than Oriental Union Chemical. It trades about -0.21 of its potential returns per unit of risk. Oriental Union Chemical is currently generating about -0.41 per unit of risk. If you would invest 2,250 in China Steel Corp on September 1, 2024 and sell it today you would lose (130.00) from holding China Steel Corp or give up 5.78% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Steel Corp vs. Oriental Union Chemical
Performance |
| Timeline |
| China Steel Corp |
| Oriental Union Chemical |
China Steel and Oriental Union Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Steel and Oriental Union
The main advantage of trading using opposite China Steel and Oriental Union positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Steel position performs unexpectedly, Oriental Union 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 Oriental Union will offset losses from the drop in Oriental Union'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 |
| Oriental Union vs. Basso Industry Corp | Oriental Union vs. Chung Hsin Electric Machinery | Oriental Union vs. TYC Brother Industrial | Oriental Union vs. TECO Electric Machinery |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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