Correlation Between China Steel and China Steel
Can any of the company-specific risk be diversified away by investing in both China Steel and China Steel 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 China Steel 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 China Steel Structure, you can compare the effects of market volatilities on China Steel and China Steel 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 China Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Steel and China Steel.
Diversification Opportunities for China Steel and China Steel
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between China and China is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding China Steel Corp and China Steel Structure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Steel Structure 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 China Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Steel Structure has no effect on the direction of China Steel i.e., China Steel and China Steel go up and down completely randomly.
Pair Corralation between China Steel and China Steel
Assuming the 90 days trading horizon China Steel Corp is expected to under-perform the China Steel. But the stock apears to be less risky and, when comparing its historical volatility, China Steel Corp is 1.06 times less risky than China Steel. The stock trades about -0.05 of its potential returns per unit of risk. The China Steel Structure is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 5,920 in China Steel Structure on September 3, 2024 and sell it today you would lose (620.00) from holding China Steel Structure or give up 10.47% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.79% |
| Values | Daily Returns |
China Steel Corp vs. China Steel Structure
Performance |
| Timeline |
| China Steel Corp |
| China Steel Structure |
China Steel and China Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Steel and China Steel
The main advantage of trading using opposite China Steel and China Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Steel position performs unexpectedly, China Steel 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 China Steel will offset losses from the drop in China Steel'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 |
| China Steel vs. Universal Microelectronics Co | China Steel vs. AVerMedia Technologies | China Steel vs. Symtek Automation Asia | China Steel vs. WiseChip Semiconductor |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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