Correlation Between LARGAN Precision and China Steel
Can any of the company-specific risk be diversified away by investing in both LARGAN Precision 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 LARGAN Precision and China Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LARGAN Precision Co and China Steel Corp, you can compare the effects of market volatilities on LARGAN Precision 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 LARGAN Precision with a short position of China Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of LARGAN Precision and China Steel.
Diversification Opportunities for LARGAN Precision and China Steel
-0.91 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between LARGAN and China is -0.91. Overlapping area represents the amount of risk that can be diversified away by holding LARGAN Precision Co 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 LARGAN Precision 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 LARGAN Precision Co 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 LARGAN Precision i.e., LARGAN Precision and China Steel go up and down completely randomly.
Pair Corralation between LARGAN Precision and China Steel
Assuming the 90 days trading horizon LARGAN Precision Co is expected to generate 1.61 times more return on investment than China Steel. However, LARGAN Precision is 1.61 times more volatile than China Steel Corp. It trades about 0.15 of its potential returns per unit of risk. China Steel Corp is currently generating about -0.06 per unit of risk. If you would invest 255,000 in LARGAN Precision Co on October 20, 2024 and sell it today you would earn a total of 18,000 from holding LARGAN Precision Co or generate 7.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
LARGAN Precision Co vs. China Steel Corp
Performance |
| Timeline |
| LARGAN Precision |
| China Steel Corp |
LARGAN Precision and China Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LARGAN Precision and China Steel
The main advantage of trading using opposite LARGAN Precision and China Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LARGAN Precision 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.| LARGAN Precision vs. MediaTek | LARGAN Precision vs. Hon Hai Precision | LARGAN Precision vs. Delta Electronics | LARGAN Precision vs. Catcher Technology Co |
| China Steel vs. Formosa Plastics Corp | China Steel vs. Chunghwa Telecom Co | China Steel vs. Nan Ya Plastics | China Steel vs. Cathay Financial Holding |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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