Correlation Between China Steel and Hsin Kuang
Can any of the company-specific risk be diversified away by investing in both China Steel and Hsin Kuang 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 Hsin Kuang 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 Hsin Kuang Steel, you can compare the effects of market volatilities on China Steel and Hsin Kuang 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 Hsin Kuang. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Steel and Hsin Kuang.
Diversification Opportunities for China Steel and Hsin Kuang
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between China and Hsin is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding China Steel Corp and Hsin Kuang Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hsin Kuang Steel 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 Hsin Kuang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hsin Kuang Steel has no effect on the direction of China Steel i.e., China Steel and Hsin Kuang go up and down completely randomly.
Pair Corralation between China Steel and Hsin Kuang
Assuming the 90 days trading horizon China Steel Corp is expected to generate 0.25 times more return on investment than Hsin Kuang. However, China Steel Corp is 3.93 times less risky than Hsin Kuang. It trades about -0.13 of its potential returns per unit of risk. Hsin Kuang Steel is currently generating about -0.35 per unit of risk. If you would invest 4,230 in China Steel Corp on August 29, 2024 and sell it today you would lose (45.00) from holding China Steel Corp or give up 1.06% 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. Hsin Kuang Steel
Performance |
| Timeline |
| China Steel Corp |
| Hsin Kuang Steel |
China Steel and Hsin Kuang Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Steel and Hsin Kuang
The main advantage of trading using opposite China Steel and Hsin Kuang positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Steel position performs unexpectedly, Hsin Kuang 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 Hsin Kuang will offset losses from the drop in Hsin Kuang's long position.| China Steel vs. China Steel Corp | China Steel vs. Chung Hung Steel | China Steel vs. Tung Ho Steel | China Steel vs. Feng Hsin Steel |
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 Managers module to screen money managers from public funds and ETFs managed around the world.
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