Correlation Between China Steel and Wan Hai
Can any of the company-specific risk be diversified away by investing in both China Steel and Wan Hai 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 Wan Hai 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 Wan Hai Lines, you can compare the effects of market volatilities on China Steel and Wan Hai 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 Wan Hai. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Steel and Wan Hai.
Diversification Opportunities for China Steel and Wan Hai
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between China and Wan is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding China Steel Corp and Wan Hai Lines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wan Hai Lines 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 Wan Hai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wan Hai Lines has no effect on the direction of China Steel i.e., China Steel and Wan Hai go up and down completely randomly.
Pair Corralation between China Steel and Wan Hai
Assuming the 90 days trading horizon China Steel Corp is expected to under-perform the Wan Hai. But the stock apears to be less risky and, when comparing its historical volatility, China Steel Corp is 2.87 times less risky than Wan Hai. The stock trades about -0.07 of its potential returns per unit of risk. The Wan Hai Lines is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 6,150 in Wan Hai Lines on August 31, 2024 and sell it today you would earn a total of 2,150 from holding Wan Hai Lines or generate 34.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.73% |
| Values | Daily Returns |
China Steel Corp vs. Wan Hai Lines
Performance |
| Timeline |
| China Steel Corp |
| Wan Hai Lines |
China Steel and Wan Hai Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Steel and Wan Hai
The main advantage of trading using opposite China Steel and Wan Hai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Steel position performs unexpectedly, Wan Hai 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 Wan Hai will offset losses from the drop in Wan Hai'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 |
| Wan Hai vs. Yang Ming Marine | Wan Hai vs. Evergreen Marine Corp | Wan Hai vs. Eva Airways Corp | Wan Hai vs. China Airlines |
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
Other Complementary Tools
| Money Managers Screen money managers from public funds and ETFs managed around the world | |
| Portfolio Anywhere Track or share privately all of your investments from the convenience of any device | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing | |
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm |