Correlation Between China Steel and Coxon Precise
Can any of the company-specific risk be diversified away by investing in both China Steel and Coxon Precise 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 Coxon Precise 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 Coxon Precise Industrial, you can compare the effects of market volatilities on China Steel and Coxon Precise 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 Coxon Precise. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Steel and Coxon Precise.
Diversification Opportunities for China Steel and Coxon Precise
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between China and Coxon is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding China Steel Corp and Coxon Precise Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coxon Precise 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 Coxon Precise. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coxon Precise Industrial has no effect on the direction of China Steel i.e., China Steel and Coxon Precise go up and down completely randomly.
Pair Corralation between China Steel and Coxon Precise
Assuming the 90 days trading horizon China Steel Corp is expected to generate 0.1 times more return on investment than Coxon Precise. However, China Steel Corp is 9.55 times less risky than Coxon Precise. It trades about -0.14 of its potential returns per unit of risk. Coxon Precise Industrial is currently generating about -0.07 per unit of risk. If you would invest 4,250 in China Steel Corp on September 3, 2024 and sell it today you would lose (75.00) from holding China Steel Corp or give up 1.76% 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. Coxon Precise Industrial
Performance |
| Timeline |
| China Steel Corp |
| Coxon Precise Industrial |
China Steel and Coxon Precise Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Steel and Coxon Precise
The main advantage of trading using opposite China Steel and Coxon Precise positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Steel position performs unexpectedly, Coxon Precise 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 Coxon Precise will offset losses from the drop in Coxon Precise's long position.| China Steel vs. Thunder Tiger Corp | China Steel vs. Synmosa Biopharma | China Steel vs. Oriental Union Chemical | China Steel vs. Ruentex Development Co |
| Coxon Precise vs. Taiwan Semiconductor Manufacturing | Coxon Precise vs. Yang Ming Marine | Coxon Precise vs. ASE Industrial Holding | Coxon Precise vs. AU Optronics |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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