Correlation Between China Steel and Dow Jones
Can any of the company-specific risk be diversified away by investing in both China Steel and Dow Jones 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 Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Steel Structure and Dow Jones Industrial, you can compare the effects of market volatilities on China Steel and Dow Jones 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 Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Steel and Dow Jones.
Diversification Opportunities for China Steel and Dow Jones
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between China and Dow is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding China Steel Structure and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones 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 Structure are associated (or correlated) with Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of China Steel i.e., China Steel and Dow Jones go up and down completely randomly.
Pair Corralation between China Steel and Dow Jones
Assuming the 90 days trading horizon China Steel Structure is expected to under-perform the Dow Jones. In addition to that, China Steel is 1.4 times more volatile than Dow Jones Industrial. It trades about -0.03 of its total potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.2 per unit of volatility. If you would invest 4,093,693 in Dow Jones Industrial on September 3, 2024 and sell it today you would earn a total of 397,372 from holding Dow Jones Industrial or generate 9.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 98.44% |
| Values | Daily Returns |
China Steel Structure vs. Dow Jones Industrial
Performance |
| Timeline |
China Steel and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
China Steel Structure
Pair trading matchups for China Steel
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with China Steel and Dow Jones
The main advantage of trading using opposite China Steel and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Steel position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| China Steel vs. Universal Microelectronics Co | China Steel vs. AVerMedia Technologies | China Steel vs. Symtek Automation Asia | China Steel vs. WiseChip Semiconductor |
| Dow Jones vs. Eastern Co | Dow Jones vs. Uber Technologies | Dow Jones vs. AKITA Drilling | Dow Jones vs. Chemours Co |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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