Correlation Between China Steel and Tycoons Worldwide
Can any of the company-specific risk be diversified away by investing in both China Steel and Tycoons Worldwide 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 Tycoons Worldwide 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 Tycoons Worldwide Group, you can compare the effects of market volatilities on China Steel and Tycoons Worldwide 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 Tycoons Worldwide. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Steel and Tycoons Worldwide.
Diversification Opportunities for China Steel and Tycoons Worldwide
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between China and Tycoons is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding China Steel Corp and Tycoons Worldwide Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tycoons Worldwide 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 Tycoons Worldwide. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tycoons Worldwide has no effect on the direction of China Steel i.e., China Steel and Tycoons Worldwide go up and down completely randomly.
Pair Corralation between China Steel and Tycoons Worldwide
Assuming the 90 days trading horizon China Steel Corp is expected to generate 0.92 times more return on investment than Tycoons Worldwide. However, China Steel Corp is 1.09 times less risky than Tycoons Worldwide. It trades about -0.07 of its potential returns per unit of risk. Tycoons Worldwide Group is currently generating about -0.29 per unit of risk. If you would invest 2,000 in China Steel Corp on October 23, 2024 and sell it today you would lose (45.00) from holding China Steel Corp or give up 2.25% 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. Tycoons Worldwide Group
Performance |
| Timeline |
| China Steel Corp |
| Tycoons Worldwide |
China Steel and Tycoons Worldwide Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Steel and Tycoons Worldwide
The main advantage of trading using opposite China Steel and Tycoons Worldwide positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Steel position performs unexpectedly, Tycoons Worldwide 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 Tycoons Worldwide will offset losses from the drop in Tycoons Worldwide'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 |
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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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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