Correlation Between China Steel and Ta Chen
Can any of the company-specific risk be diversified away by investing in both China Steel and Ta Chen 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 Ta Chen 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 Ta Chen Stainless, you can compare the effects of market volatilities on China Steel and Ta Chen 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 Ta Chen. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Steel and Ta Chen.
Diversification Opportunities for China Steel and Ta Chen
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between China and 2027 is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding China Steel Corp and Ta Chen Stainless in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ta Chen Stainless 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 Ta Chen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ta Chen Stainless has no effect on the direction of China Steel i.e., China Steel and Ta Chen go up and down completely randomly.
Pair Corralation between China Steel and Ta Chen
Assuming the 90 days trading horizon China Steel Corp is expected to under-perform the Ta Chen. But the stock apears to be less risky and, when comparing its historical volatility, China Steel Corp is 1.35 times less risky than Ta Chen. The stock trades about -0.06 of its potential returns per unit of risk. The Ta Chen Stainless is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 3,620 in Ta Chen Stainless on November 3, 2024 and sell it today you would lose (215.00) from holding Ta Chen Stainless or give up 5.94% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Steel Corp vs. Ta Chen Stainless
Performance |
| Timeline |
| China Steel Corp |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Ta Chen Stainless |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Insignificant
China Steel and Ta Chen Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Steel and Ta Chen
The main advantage of trading using opposite China Steel and Ta Chen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Steel position performs unexpectedly, Ta Chen 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 Ta Chen will offset losses from the drop in Ta Chen's long position.The idea behind China Steel Corp and Ta Chen Stainless pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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