Correlation Between China Steel and Iron Force
Can any of the company-specific risk be diversified away by investing in both China Steel and Iron Force 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 Iron Force 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 Iron Force Industrial, you can compare the effects of market volatilities on China Steel and Iron Force 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 Iron Force. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Steel and Iron Force.
Diversification Opportunities for China Steel and Iron Force
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between China and Iron is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding China Steel Corp and Iron Force Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iron Force Industrial 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 Iron Force. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iron Force Industrial has no effect on the direction of China Steel i.e., China Steel and Iron Force go up and down completely randomly.
Pair Corralation between China Steel and Iron Force
Assuming the 90 days trading horizon China Steel Corp is expected to generate 0.26 times more return on investment than Iron Force. However, China Steel Corp is 3.84 times less risky than Iron Force. It trades about -0.07 of its potential returns per unit of risk. Iron Force Industrial is currently generating about -0.22 per unit of risk. If you would invest 4,200 in China Steel Corp on September 1, 2024 and sell it today you would lose (25.00) from holding China Steel Corp or give up 0.6% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Steel Corp vs. Iron Force Industrial
Performance |
| Timeline |
| China Steel Corp |
| Iron Force Industrial |
China Steel and Iron Force Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Steel and Iron Force
The main advantage of trading using opposite China Steel and Iron Force positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Steel position performs unexpectedly, Iron Force 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 Iron Force will offset losses from the drop in Iron Force'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 |
| Iron Force vs. Hota Industrial Mfg | Iron Force vs. BizLink Holding | Iron Force vs. Cub Elecparts | Iron Force vs. Hu Lane Associate |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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