Correlation Between Chien Shing and Sheng Yu
Can any of the company-specific risk be diversified away by investing in both Chien Shing and Sheng Yu 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 Chien Shing and Sheng Yu into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chien Shing Stainless and Sheng Yu Steel, you can compare the effects of market volatilities on Chien Shing and Sheng Yu 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 Chien Shing with a short position of Sheng Yu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chien Shing and Sheng Yu.
Diversification Opportunities for Chien Shing and Sheng Yu
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between Chien and Sheng is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Chien Shing Stainless and Sheng Yu Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sheng Yu Steel and Chien Shing 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 Chien Shing Stainless are associated (or correlated) with Sheng Yu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sheng Yu Steel has no effect on the direction of Chien Shing i.e., Chien Shing and Sheng Yu go up and down completely randomly.
Pair Corralation between Chien Shing and Sheng Yu
Assuming the 90 days trading horizon Chien Shing Stainless is expected to generate 2.43 times more return on investment than Sheng Yu. However, Chien Shing is 2.43 times more volatile than Sheng Yu Steel. It trades about 0.07 of its potential returns per unit of risk. Sheng Yu Steel is currently generating about 0.01 per unit of risk. If you would invest 498.00 in Chien Shing Stainless on September 3, 2024 and sell it today you would earn a total of 592.00 from holding Chien Shing Stainless or generate 118.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chien Shing Stainless vs. Sheng Yu Steel
Performance |
| Timeline |
| Chien Shing Stainless |
| Sheng Yu Steel |
Chien Shing and Sheng Yu Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chien Shing and Sheng Yu
The main advantage of trading using opposite Chien Shing and Sheng Yu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chien Shing position performs unexpectedly, Sheng Yu 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 Sheng Yu will offset losses from the drop in Sheng Yu's long position.The idea behind Chien Shing Stainless and Sheng Yu Steel pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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