Correlation Between China Steel and Tang Eng
Can any of the company-specific risk be diversified away by investing in both China Steel and Tang Eng 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 Tang Eng 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 Tang Eng Iron, you can compare the effects of market volatilities on China Steel and Tang Eng 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 Tang Eng. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Steel and Tang Eng.
Diversification Opportunities for China Steel and Tang Eng
-0.67 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between China and Tang is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding China Steel Corp and Tang Eng Iron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tang Eng Iron 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 Tang Eng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tang Eng Iron has no effect on the direction of China Steel i.e., China Steel and Tang Eng go up and down completely randomly.
Pair Corralation between China Steel and Tang Eng
Assuming the 90 days trading horizon China Steel Corp is expected to under-perform the Tang Eng. But the stock apears to be less risky and, when comparing its historical volatility, China Steel Corp is 2.21 times less risky than Tang Eng. The stock trades about -0.06 of its potential returns per unit of risk. The Tang Eng Iron is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 3,285 in Tang Eng Iron on August 31, 2024 and sell it today you would earn a total of 35.00 from holding Tang Eng Iron or generate 1.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Steel Corp vs. Tang Eng Iron
Performance |
| Timeline |
| China Steel Corp |
| Tang Eng Iron |
China Steel and Tang Eng Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Steel and Tang Eng
The main advantage of trading using opposite China Steel and Tang Eng positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Steel position performs unexpectedly, Tang Eng 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 Tang Eng will offset losses from the drop in Tang Eng's long position.| China Steel vs. Synmosa Biopharma | China Steel vs. Taiwan Glass Ind | China Steel vs. Tong Tai Machine Tool | China Steel vs. Oriental Union Chemical |
| Tang Eng vs. Basso Industry Corp | Tang Eng vs. Chung Hsin Electric Machinery | Tang Eng vs. TYC Brother Industrial | Tang Eng vs. TECO Electric Machinery |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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