Correlation Between China Steel and Chia Yi
Can any of the company-specific risk be diversified away by investing in both China Steel and Chia Yi 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 Chia Yi 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 Chia Yi Steel, you can compare the effects of market volatilities on China Steel and Chia Yi 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 Chia Yi. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Steel and Chia Yi.
Diversification Opportunities for China Steel and Chia Yi
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between China and Chia is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding China Steel Corp and Chia Yi Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chia Yi 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 Chia Yi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chia Yi Steel has no effect on the direction of China Steel i.e., China Steel and Chia Yi go up and down completely randomly.
Pair Corralation between China Steel and Chia Yi
Assuming the 90 days trading horizon China Steel Corp is expected to under-perform the Chia Yi. But the stock apears to be less risky and, when comparing its historical volatility, China Steel Corp is 11.95 times less risky than Chia Yi. The stock trades about -0.07 of its potential returns per unit of risk. The Chia Yi Steel is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 1,035 in Chia Yi Steel on September 1, 2024 and sell it today you would earn a total of 85.00 from holding Chia Yi Steel or generate 8.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Steel Corp vs. Chia Yi Steel
Performance |
| Timeline |
| China Steel Corp |
| Chia Yi Steel |
China Steel and Chia Yi Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Steel and Chia Yi
The main advantage of trading using opposite China Steel and Chia Yi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Steel position performs unexpectedly, Chia Yi 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 Chia Yi will offset losses from the drop in Chia Yi's long position.| China Steel vs. Tainet Communication System | China Steel vs. Thinking Electronic Industrial | China Steel vs. Simple Mart Retail | China Steel vs. Tradetool Auto Co |
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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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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