Correlation Between Sinosteel Engineering and Industrial Securities

Can any of the company-specific risk be diversified away by investing in both Sinosteel Engineering and Industrial Securities 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 Sinosteel Engineering and Industrial Securities into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sinosteel Engineering and and Industrial Securities Co, you can compare the effects of market volatilities on Sinosteel Engineering and Industrial Securities 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 Sinosteel Engineering with a short position of Industrial Securities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sinosteel Engineering and Industrial Securities.

Diversification Opportunities for Sinosteel Engineering and Industrial Securities

0.71

Correlation Coefficient

Sinosteel Engineering  Industrial Securities

Poor diversification

The 3 months correlation between Sinosteel and Industrial is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Sinosteel Engineering and and Industrial Securities Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrial Securities and Sinosteel Engineering 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 Sinosteel Engineering and are associated (or correlated) with Industrial Securities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industrial Securities has no effect on the direction of Sinosteel Engineering i.e., Sinosteel Engineering and Industrial Securities go up and down completely randomly.

Pair Corralation between Sinosteel Engineering and Industrial Securities

Assuming the 90 days trading horizon Sinosteel Engineering and is expected to generate 1.65 times more return on investment than Industrial Securities. However, Sinosteel Engineering is 1.65 times more volatile than Industrial Securities Co. It trades about -0.02 of its potential returns per unit of risk. Industrial Securities Co is currently generating about -0.1 per unit of risk. If you would invest  714.00  in Sinosteel Engineering and on December 1, 2024 and sell it today you would lose (26.00) from holding Sinosteel Engineering and or give up 3.64% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Sinosteel Engineering and  vs.  Industrial Securities Co

Sinosteel Engineering and

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sinosteel Engineering and has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Sinosteel Engineering is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Industrial Securities

Risk-Adjusted Performance

Very Weak

Over the last 90 days Industrial Securities Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Sinosteel Engineering and Industrial Securities

The main advantage of trading using opposite Sinosteel Engineering and Industrial Securities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sinosteel Engineering position performs unexpectedly, Industrial Securities 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 Industrial Securities will offset losses from the drop in Industrial Securities' long position.

The idea behind Sinosteel Engineering and and Industrial Securities Co 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.