Correlation Between CHC Resources and China Steel
Can any of the company-specific risk be diversified away by investing in both CHC Resources 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 CHC Resources and China Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CHC Resources Corp and China Steel Chemical, you can compare the effects of market volatilities on CHC Resources 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 CHC Resources with a short position of China Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHC Resources and China Steel.
Diversification Opportunities for CHC Resources and China Steel
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between CHC and China is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding CHC Resources 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 CHC Resources 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 CHC Resources 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 CHC Resources i.e., CHC Resources and China Steel go up and down completely randomly.
Pair Corralation between CHC Resources and China Steel
Assuming the 90 days trading horizon CHC Resources Corp is expected to generate 0.6 times more return on investment than China Steel. However, CHC Resources Corp is 1.66 times less risky than China Steel. It trades about 0.01 of its potential returns per unit of risk. China Steel Chemical is currently generating about -0.18 per unit of risk. If you would invest 6,710 in CHC Resources Corp on October 26, 2024 and sell it today you would earn a total of 10.00 from holding CHC Resources Corp or generate 0.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CHC Resources Corp vs. China Steel Chemical
Performance |
| Timeline |
| CHC Resources Corp |
| China Steel Chemical |
CHC Resources and China Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CHC Resources and China Steel
The main advantage of trading using opposite CHC Resources and China Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CHC Resources 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.| CHC Resources vs. China Steel Chemical | CHC Resources vs. Taiwan Secom Co | CHC Resources vs. Nak Sealing Technologies | CHC Resources vs. Sinyi Realty |
| China Steel vs. Formosa Chemicals Fibre | China Steel vs. Formosa Plastics Corp | China Steel vs. Cheng Shin Rubber | China Steel vs. President Chain Store |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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