Correlation Between Wan Hai and China Steel
Can any of the company-specific risk be diversified away by investing in both Wan Hai and China 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 Wan Hai and China Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wan Hai Lines and China Steel Corp, you can compare the effects of market volatilities on Wan Hai and China 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 Wan Hai with a short position of China Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wan Hai and China Steel.
Diversification Opportunities for Wan Hai and China Steel
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Wan and China is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Wan Hai Lines and China Steel Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Steel Corp and Wan Hai 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 Wan Hai Lines are associated (or correlated) with China Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Steel Corp has no effect on the direction of Wan Hai i.e., Wan Hai and China Steel go up and down completely randomly.
Pair Corralation between Wan Hai and China Steel
Assuming the 90 days trading horizon Wan Hai Lines is expected to generate 2.87 times more return on investment than China Steel. However, Wan Hai is 2.87 times more volatile than China Steel Corp. It trades about 0.04 of its potential returns per unit of risk. China Steel Corp is currently generating about -0.07 per unit of risk. If you would invest 6,150 in Wan Hai Lines on August 31, 2024 and sell it today you would earn a total of 2,150 from holding Wan Hai Lines or generate 34.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.73% |
| Values | Daily Returns |
Wan Hai Lines vs. China Steel Corp
Performance |
| Timeline |
| Wan Hai Lines |
| China Steel Corp |
Wan Hai and China Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wan Hai and China Steel
The main advantage of trading using opposite Wan Hai and China Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wan Hai position performs unexpectedly, China 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 China Steel will offset losses from the drop in China Steel's long position.| Wan Hai vs. Yang Ming Marine | Wan Hai vs. Evergreen Marine Corp | Wan Hai vs. Eva Airways Corp | Wan Hai vs. China Airlines |
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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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