Correlation Between Pou Chen and China Steel
Can any of the company-specific risk be diversified away by investing in both Pou Chen 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 Pou Chen and China Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pou Chen Corp and China Steel Chemical, you can compare the effects of market volatilities on Pou Chen 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 Pou Chen with a short position of China Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pou Chen and China Steel.
Diversification Opportunities for Pou Chen and China Steel
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Pou and China is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Pou Chen Corp and China Steel Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Steel Chemical and Pou Chen 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 Pou Chen Corp 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 Chemical has no effect on the direction of Pou Chen i.e., Pou Chen and China Steel go up and down completely randomly.
Pair Corralation between Pou Chen and China Steel
Assuming the 90 days trading horizon Pou Chen Corp is expected to under-perform the China Steel. In addition to that, Pou Chen is 1.53 times more volatile than China Steel Chemical. It trades about -0.1 of its total potential returns per unit of risk. China Steel Chemical is currently generating about 0.03 per unit of volatility. If you would invest 9,200 in China Steel Chemical on November 5, 2024 and sell it today you would earn a total of 30.00 from holding China Steel Chemical or generate 0.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pou Chen Corp vs. China Steel Chemical
Performance |
| Timeline |
| Pou Chen Corp |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| China Steel Chemical |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Pou Chen and China Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pou Chen and China Steel
The main advantage of trading using opposite Pou Chen and China Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pou Chen 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.The idea behind Pou Chen Corp and China Steel Chemical 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
Other Complementary Tools
| My Watchlist Analysis Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like | |
| Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital | |
| Fundamentals Comparison Compare fundamentals across multiple equities to find investing opportunities | |
| Portfolio Analyzer Portfolio analysis module that provides access to portfolio diagnostics and optimization engine | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk |