Correlation Between China Steel and Andes Technology
Can any of the company-specific risk be diversified away by investing in both China Steel and Andes Technology 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 Andes Technology 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 Andes Technology Corp, you can compare the effects of market volatilities on China Steel and Andes Technology 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 Andes Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Steel and Andes Technology.
Diversification Opportunities for China Steel and Andes Technology
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between China and Andes is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding China Steel Corp and Andes Technology Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Andes Technology Corp 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 Andes Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Andes Technology Corp has no effect on the direction of China Steel i.e., China Steel and Andes Technology go up and down completely randomly.
Pair Corralation between China Steel and Andes Technology
Assuming the 90 days trading horizon China Steel Corp is expected to under-perform the Andes Technology. But the stock apears to be less risky and, when comparing its historical volatility, China Steel Corp is 2.44 times less risky than Andes Technology. The stock trades about -0.07 of its potential returns per unit of risk. The Andes Technology Corp is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 46,500 in Andes Technology Corp on August 31, 2024 and sell it today you would lose (10,600) from holding Andes Technology Corp or give up 22.8% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Steel Corp vs. Andes Technology Corp
Performance |
| Timeline |
| China Steel Corp |
| Andes Technology Corp |
China Steel and Andes Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Steel and Andes Technology
The main advantage of trading using opposite China Steel and Andes Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Steel position performs unexpectedly, Andes Technology 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 Andes Technology will offset losses from the drop in Andes Technology'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 |
| Andes Technology vs. Taiwan Semiconductor Manufacturing | Andes Technology vs. MediaTek | Andes Technology vs. United Microelectronics | Andes Technology vs. Novatek Microelectronics Corp |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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