Correlation Between China Steel and CHC Resources
Can any of the company-specific risk be diversified away by investing in both China Steel and CHC Resources 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 CHC Resources 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 CHC Resources Corp, you can compare the effects of market volatilities on China Steel and CHC Resources 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 CHC Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Steel and CHC Resources.
Diversification Opportunities for China Steel and CHC Resources
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between China and CHC is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding China Steel Corp and CHC Resources Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHC Resources 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 CHC Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHC Resources Corp has no effect on the direction of China Steel i.e., China Steel and CHC Resources go up and down completely randomly.
Pair Corralation between China Steel and CHC Resources
Assuming the 90 days trading horizon China Steel Corp is expected to under-perform the CHC Resources. But the stock apears to be less risky and, when comparing its historical volatility, China Steel Corp is 1.09 times less risky than CHC Resources. The stock trades about -0.07 of its potential returns per unit of risk. The CHC Resources Corp is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 4,700 in CHC Resources Corp on October 25, 2024 and sell it today you would earn a total of 2,020 from holding CHC Resources Corp or generate 42.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
China Steel Corp vs. CHC Resources Corp
Performance |
| Timeline |
| China Steel Corp |
| CHC Resources Corp |
China Steel and CHC Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Steel and CHC Resources
The main advantage of trading using opposite China Steel and CHC Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Steel position performs unexpectedly, CHC Resources 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 CHC Resources will offset losses from the drop in CHC Resources' 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 |
| CHC Resources vs. China Steel Chemical | CHC Resources vs. Taiwan Secom Co | CHC Resources vs. Nak Sealing Technologies | CHC Resources vs. Sinyi Realty |
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 Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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