Correlation Between China Steel and Luo Lih
Can any of the company-specific risk be diversified away by investing in both China Steel and Luo Lih 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 Luo Lih 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 Luo Lih Fen, you can compare the effects of market volatilities on China Steel and Luo Lih 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 Luo Lih. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Steel and Luo Lih.
Diversification Opportunities for China Steel and Luo Lih
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between China and Luo is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding China Steel Corp and Luo Lih Fen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Luo Lih Fen 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 Luo Lih. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Luo Lih Fen has no effect on the direction of China Steel i.e., China Steel and Luo Lih go up and down completely randomly.
Pair Corralation between China Steel and Luo Lih
Assuming the 90 days trading horizon China Steel Corp is expected to under-perform the Luo Lih. In addition to that, China Steel is 1.43 times more volatile than Luo Lih Fen. It trades about -0.34 of its total potential returns per unit of risk. Luo Lih Fen is currently generating about -0.4 per unit of volatility. If you would invest 5,840 in Luo Lih Fen on September 12, 2024 and sell it today you would lose (460.00) from holding Luo Lih Fen or give up 7.88% 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. Luo Lih Fen
Performance |
| Timeline |
| China Steel Corp |
| Luo Lih Fen |
China Steel and Luo Lih Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Steel and Luo Lih
The main advantage of trading using opposite China Steel and Luo Lih positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Steel position performs unexpectedly, Luo Lih 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 Luo Lih will offset losses from the drop in Luo Lih's long position.| China Steel vs. Tainan Spinning Co | China Steel vs. Lealea Enterprise Co | China Steel vs. China Petrochemical Development | China Steel vs. Ruentex Development Co |
| Luo Lih vs. Ruentex Development Co | Luo Lih vs. Symtek Automation Asia | Luo Lih vs. CTCI Corp | Luo Lih vs. Information Technology Total |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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