Correlation Between China Steel and China Container
Can any of the company-specific risk be diversified away by investing in both China Steel and China Container 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 Container 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 Container Terminal, you can compare the effects of market volatilities on China Steel and China Container 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 Container. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Steel and China Container.
Diversification Opportunities for China Steel and China Container
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between China and China is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding China Steel Corp and China Container Terminal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Container Terminal 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 Container. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Container Terminal has no effect on the direction of China Steel i.e., China Steel and China Container go up and down completely randomly.
Pair Corralation between China Steel and China Container
Assuming the 90 days trading horizon China Steel Corp is expected to generate 0.51 times more return on investment than China Container. However, China Steel Corp is 1.94 times less risky than China Container. It trades about 0.01 of its potential returns per unit of risk. China Container Terminal is currently generating about -0.02 per unit of risk. If you would invest 2,380 in China Steel Corp on November 28, 2024 and sell it today you would earn a total of 10.00 from holding China Steel Corp or generate 0.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Steel Corp vs. China Container Terminal
Performance |
| Timeline |
| China Steel Corp |
| China Container Terminal |
China Steel and China Container Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Steel and China Container
The main advantage of trading using opposite China Steel and China Container positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Steel position performs unexpectedly, China Container 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 Container will offset losses from the drop in China Container'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 Container vs. Sincere Navigation Corp | China Container vs. Evergreen International Storage | China Container vs. Tze Shin International | China Container vs. First Steamship Co |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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