Correlation Between China Steel and Taiwan Steel
Can any of the company-specific risk be diversified away by investing in both China Steel and Taiwan Steel 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 Taiwan Steel 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 Taiwan Steel Union, you can compare the effects of market volatilities on China Steel and Taiwan Steel 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 Taiwan Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Steel and Taiwan Steel.
Diversification Opportunities for China Steel and Taiwan Steel
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between China and Taiwan is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding China Steel Corp and Taiwan Steel Union in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Steel Union 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 Taiwan Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Steel Union has no effect on the direction of China Steel i.e., China Steel and Taiwan Steel go up and down completely randomly.
Pair Corralation between China Steel and Taiwan Steel
Assuming the 90 days trading horizon China Steel Corp is expected to generate 40.73 times more return on investment than Taiwan Steel. However, China Steel is 40.73 times more volatile than Taiwan Steel Union. It trades about 0.05 of its potential returns per unit of risk. Taiwan Steel Union is currently generating about 0.06 per unit of risk. If you would invest 4,420 in China Steel Corp on September 2, 2024 and sell it today you would lose (245.00) from holding China Steel Corp or give up 5.54% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.73% |
| Values | Daily Returns |
China Steel Corp vs. Taiwan Steel Union
Performance |
| Timeline |
| China Steel Corp |
| Taiwan Steel Union |
China Steel and Taiwan Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Steel and Taiwan Steel
The main advantage of trading using opposite China Steel and Taiwan Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Steel position performs unexpectedly, Taiwan Steel 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 Taiwan Steel will offset losses from the drop in Taiwan Steel's long position.| China Steel vs. Synmosa Biopharma | China Steel vs. Taiwan Glass Ind | China Steel vs. Tong Tai Machine Tool | China Steel vs. Oriental Union Chemical |
| Taiwan Steel vs. Cleanaway Co | Taiwan Steel vs. Taiwan Secom Co | Taiwan Steel vs. TTET Union Corp | Taiwan Steel vs. Tehmag Foods |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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