Correlation Between China Steel and Sheng Yu
Can any of the company-specific risk be diversified away by investing in both China Steel and Sheng Yu 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 Sheng Yu 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 Sheng Yu Steel, you can compare the effects of market volatilities on China Steel and Sheng Yu 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 Sheng Yu. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Steel and Sheng Yu.
Diversification Opportunities for China Steel and Sheng Yu
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between China and Sheng is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding China Steel Corp and Sheng Yu Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sheng Yu Steel 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 Sheng Yu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sheng Yu Steel has no effect on the direction of China Steel i.e., China Steel and Sheng Yu go up and down completely randomly.
Pair Corralation between China Steel and Sheng Yu
Assuming the 90 days trading horizon China Steel Corp is expected to generate 1.27 times more return on investment than Sheng Yu. However, China Steel is 1.27 times more volatile than Sheng Yu Steel. It trades about -0.05 of its potential returns per unit of risk. Sheng Yu Steel is currently generating about -0.08 per unit of risk. If you would invest 2,375 in China Steel Corp on August 29, 2024 and sell it today you would lose (200.00) from holding China Steel Corp or give up 8.42% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Steel Corp vs. Sheng Yu Steel
Performance |
| Timeline |
| China Steel Corp |
| Sheng Yu Steel |
China Steel and Sheng Yu Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Steel and Sheng Yu
The main advantage of trading using opposite China Steel and Sheng Yu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Steel position performs unexpectedly, Sheng Yu 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 Sheng Yu will offset losses from the drop in Sheng Yu'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 |
| Sheng Yu vs. Yieh Phui Enterprise | Sheng Yu vs. Tung Ho Steel | Sheng Yu vs. Feng Hsin Steel | Sheng Yu vs. Chung Hung Steel |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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