Correlation Between Steel Dynamics and CSPC Pharmaceutical
Can any of the company-specific risk be diversified away by investing in both Steel Dynamics and CSPC Pharmaceutical 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 Steel Dynamics and CSPC Pharmaceutical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Dynamics and CSPC Pharmaceutical Group, you can compare the effects of market volatilities on Steel Dynamics and CSPC Pharmaceutical 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 Steel Dynamics with a short position of CSPC Pharmaceutical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and CSPC Pharmaceutical.
Diversification Opportunities for Steel Dynamics and CSPC Pharmaceutical
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Steel and CSPC is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and CSPC Pharmaceutical Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSPC Pharmaceutical and Steel Dynamics 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 Steel Dynamics are associated (or correlated) with CSPC Pharmaceutical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CSPC Pharmaceutical has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and CSPC Pharmaceutical go up and down completely randomly.
Pair Corralation between Steel Dynamics and CSPC Pharmaceutical
Given the investment horizon of 90 days Steel Dynamics is expected to generate 0.82 times more return on investment than CSPC Pharmaceutical. However, Steel Dynamics is 1.21 times less risky than CSPC Pharmaceutical. It trades about 0.1 of its potential returns per unit of risk. CSPC Pharmaceutical Group is currently generating about -0.18 per unit of risk. If you would invest 13,516 in Steel Dynamics on August 30, 2024 and sell it today you would earn a total of 867.00 from holding Steel Dynamics or generate 6.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Steel Dynamics vs. CSPC Pharmaceutical Group
Performance |
| Timeline |
| Steel Dynamics |
| CSPC Pharmaceutical |
Steel Dynamics and CSPC Pharmaceutical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Steel Dynamics and CSPC Pharmaceutical
The main advantage of trading using opposite Steel Dynamics and CSPC Pharmaceutical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics position performs unexpectedly, CSPC Pharmaceutical 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 CSPC Pharmaceutical will offset losses from the drop in CSPC Pharmaceutical's long position.| Steel Dynamics vs. Cleveland Cliffs | Steel Dynamics vs. United States Steel | Steel Dynamics vs. ArcelorMittal SA ADR | Steel Dynamics vs. Reliance Steel Aluminum |
| CSPC Pharmaceutical vs. Ono Pharmaceutical Co | CSPC Pharmaceutical vs. Grifols SA ADR | CSPC Pharmaceutical vs. Pfizer Inc | CSPC Pharmaceutical vs. Northann Corp |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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