Correlation Between China Steel and X Legend
Can any of the company-specific risk be diversified away by investing in both China Steel and X Legend 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 X Legend 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 X Legend Entertainment Co, you can compare the effects of market volatilities on China Steel and X Legend 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 X Legend. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Steel and X Legend.
Diversification Opportunities for China Steel and X Legend
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between China and 4994 is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding China Steel Corp and X Legend Entertainment Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on X Legend Entertainment 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 X Legend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of X Legend Entertainment has no effect on the direction of China Steel i.e., China Steel and X Legend go up and down completely randomly.
Pair Corralation between China Steel and X Legend
Assuming the 90 days trading horizon China Steel Corp is expected to under-perform the X Legend. But the stock apears to be less risky and, when comparing its historical volatility, China Steel Corp is 1.17 times less risky than X Legend. The stock trades about -0.17 of its potential returns per unit of risk. The X Legend Entertainment Co is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest 11,500 in X Legend Entertainment Co on September 3, 2024 and sell it today you would lose (650.00) from holding X Legend Entertainment Co or give up 5.65% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Steel Corp vs. X Legend Entertainment Co
Performance |
| Timeline |
| China Steel Corp |
| X Legend Entertainment |
China Steel and X Legend Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Steel and X Legend
The main advantage of trading using opposite China Steel and X Legend positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Steel position performs unexpectedly, X Legend 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 X Legend will offset losses from the drop in X Legend'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 |
| X Legend vs. China Steel Corp | X Legend vs. Formosa Plastics Corp | X Legend vs. Cathay Financial Holding | X Legend vs. Fubon Financial Holding |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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