Correlation Between China Steel and Evergreen International
Can any of the company-specific risk be diversified away by investing in both China Steel and Evergreen International 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 Evergreen International 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 Evergreen International Storage, you can compare the effects of market volatilities on China Steel and Evergreen International 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 Evergreen International. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Steel and Evergreen International.
Diversification Opportunities for China Steel and Evergreen International
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between China and Evergreen is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding China Steel Corp and Evergreen International Storag in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evergreen International 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 Evergreen International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evergreen International has no effect on the direction of China Steel i.e., China Steel and Evergreen International go up and down completely randomly.
Pair Corralation between China Steel and Evergreen International
Assuming the 90 days trading horizon China Steel Corp is expected to under-perform the Evergreen International. But the stock apears to be less risky and, when comparing its historical volatility, China Steel Corp is 1.27 times less risky than Evergreen International. The stock trades about -0.05 of its potential returns per unit of risk. The Evergreen International Storage is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 3,360 in Evergreen International Storage on September 1, 2024 and sell it today you would lose (260.00) from holding Evergreen International Storage or give up 7.74% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Steel Corp vs. Evergreen International Storag
Performance |
| Timeline |
| China Steel Corp |
| Evergreen International |
China Steel and Evergreen International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Steel and Evergreen International
The main advantage of trading using opposite China Steel and Evergreen International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Steel position performs unexpectedly, Evergreen International 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 Evergreen International will offset losses from the drop in Evergreen International'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 |
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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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