Correlation Between China Steel and Powertech Industrial
Can any of the company-specific risk be diversified away by investing in both China Steel and Powertech Industrial 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 Powertech Industrial 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 Powertech Industrial Co, you can compare the effects of market volatilities on China Steel and Powertech Industrial 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 Powertech Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Steel and Powertech Industrial.
Diversification Opportunities for China Steel and Powertech Industrial
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between China and Powertech is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding China Steel Corp and Powertech Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Powertech Industrial 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 Powertech Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Powertech Industrial has no effect on the direction of China Steel i.e., China Steel and Powertech Industrial go up and down completely randomly.
Pair Corralation between China Steel and Powertech Industrial
Assuming the 90 days trading horizon China Steel Corp is expected to under-perform the Powertech Industrial. But the stock apears to be less risky and, when comparing its historical volatility, China Steel Corp is 2.35 times less risky than Powertech Industrial. The stock trades about -0.04 of its potential returns per unit of risk. The Powertech Industrial Co is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 1,580 in Powertech Industrial Co on August 30, 2024 and sell it today you would earn a total of 1,425 from holding Powertech Industrial Co or generate 90.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.79% |
| Values | Daily Returns |
China Steel Corp vs. Powertech Industrial Co
Performance |
| Timeline |
| China Steel Corp |
| Powertech Industrial |
China Steel and Powertech Industrial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Steel and Powertech Industrial
The main advantage of trading using opposite China Steel and Powertech Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Steel position performs unexpectedly, Powertech Industrial 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 Powertech Industrial will offset losses from the drop in Powertech Industrial'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 |
| Powertech Industrial vs. Yulon Motor Co | Powertech Industrial vs. Far Eastern Department | Powertech Industrial vs. China Steel Corp | Powertech Industrial vs. Chang Hwa Commercial |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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