Correlation Between China Steel and Level Biotechnology
Can any of the company-specific risk be diversified away by investing in both China Steel and Level Biotechnology 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 Level Biotechnology 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 Level Biotechnology, you can compare the effects of market volatilities on China Steel and Level Biotechnology 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 Level Biotechnology. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Steel and Level Biotechnology.
Diversification Opportunities for China Steel and Level Biotechnology
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between China and Level is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding China Steel Corp and Level Biotechnology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Level Biotechnology 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 Level Biotechnology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Level Biotechnology has no effect on the direction of China Steel i.e., China Steel and Level Biotechnology go up and down completely randomly.
Pair Corralation between China Steel and Level Biotechnology
Assuming the 90 days trading horizon China Steel Corp is expected to generate 0.53 times more return on investment than Level Biotechnology. However, China Steel Corp is 1.88 times less risky than Level Biotechnology. It trades about -0.01 of its potential returns per unit of risk. Level Biotechnology is currently generating about -0.04 per unit of risk. If you would invest 4,195 in China Steel Corp on September 12, 2024 and sell it today you would lose (5.00) from holding China Steel Corp or give up 0.12% 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. Level Biotechnology
Performance |
| Timeline |
| China Steel Corp |
| Level Biotechnology |
China Steel and Level Biotechnology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Steel and Level Biotechnology
The main advantage of trading using opposite China Steel and Level Biotechnology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Steel position performs unexpectedly, Level Biotechnology 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 Level Biotechnology will offset losses from the drop in Level Biotechnology's long position.| China Steel vs. Tong Tai Machine Tool | China Steel vs. Oriental Union Chemical | China Steel vs. Ruentex Development Co | China Steel vs. Symtek Automation Asia |
| Level Biotechnology vs. Ruentex Development Co | Level Biotechnology vs. Symtek Automation Asia | Level Biotechnology vs. WiseChip Semiconductor | Level Biotechnology vs. Novatek Microelectronics Corp |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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