Correlation Between China Steel and Daxin Materials
Can any of the company-specific risk be diversified away by investing in both China Steel and Daxin Materials 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 Daxin Materials 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 Daxin Materials Corp, you can compare the effects of market volatilities on China Steel and Daxin Materials 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 Daxin Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Steel and Daxin Materials.
Diversification Opportunities for China Steel and Daxin Materials
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between China and Daxin is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding China Steel Corp and Daxin Materials Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daxin Materials Corp 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 Daxin Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daxin Materials Corp has no effect on the direction of China Steel i.e., China Steel and Daxin Materials go up and down completely randomly.
Pair Corralation between China Steel and Daxin Materials
Assuming the 90 days trading horizon China Steel Corp is expected to under-perform the Daxin Materials. But the stock apears to be less risky and, when comparing its historical volatility, China Steel Corp is 8.62 times less risky than Daxin Materials. The stock trades about -0.07 of its potential returns per unit of risk. The Daxin Materials Corp is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 22,650 in Daxin Materials Corp on August 30, 2024 and sell it today you would earn a total of 50.00 from holding Daxin Materials Corp or generate 0.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
China Steel Corp vs. Daxin Materials Corp
Performance |
| Timeline |
| China Steel Corp |
| Daxin Materials Corp |
China Steel and Daxin Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Steel and Daxin Materials
The main advantage of trading using opposite China Steel and Daxin Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Steel position performs unexpectedly, Daxin Materials 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 Daxin Materials will offset losses from the drop in Daxin Materials' long position.| China Steel vs. China Steel Corp | China Steel vs. Chung Hung Steel | China Steel vs. Tung Ho Steel | China Steel vs. Feng Hsin Steel |
| Daxin Materials vs. Topco Scientific Co | Daxin Materials vs. Holtek Semiconductor | Daxin Materials vs. Greatek Electronics | Daxin Materials vs. Stark Technology |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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