Correlation Between China Steel and Shiny Chemical
Can any of the company-specific risk be diversified away by investing in both China Steel and Shiny Chemical 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 China Steel and Shiny Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Steel Chemical and Shiny Chemical Industrial, you can compare the effects of market volatilities on China Steel and Shiny Chemical 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 China Steel with a short position of Shiny Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Steel and Shiny Chemical.
Diversification Opportunities for China Steel and Shiny Chemical
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between China and Shiny is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding China Steel Chemical and Shiny Chemical Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shiny Chemical Industrial and China Steel 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 China Steel Chemical are associated (or correlated) with Shiny Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shiny Chemical Industrial has no effect on the direction of China Steel i.e., China Steel and Shiny Chemical go up and down completely randomly.
Pair Corralation between China Steel and Shiny Chemical
Assuming the 90 days trading horizon China Steel Chemical is expected to under-perform the Shiny Chemical. But the stock apears to be less risky and, when comparing its historical volatility, China Steel Chemical is 2.21 times less risky than Shiny Chemical. The stock trades about -0.1 of its potential returns per unit of risk. The Shiny Chemical Industrial is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 16,150 in Shiny Chemical Industrial on September 14, 2024 and sell it today you would lose (100.00) from holding Shiny Chemical Industrial or give up 0.62% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
China Steel Chemical vs. Shiny Chemical Industrial
Performance |
Timeline |
China Steel Chemical |
Shiny Chemical Industrial |
China Steel and Shiny Chemical Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with China Steel and Shiny Chemical
The main advantage of trading using opposite China Steel and Shiny Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Steel position performs unexpectedly, Shiny Chemical 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 Shiny Chemical will offset losses from the drop in Shiny Chemical's long position.China Steel vs. Tainan Spinning Co | China Steel vs. Lealea Enterprise Co | China Steel vs. China Petrochemical Development | China Steel vs. Ruentex Development Co |
Shiny Chemical vs. China Steel Chemical | Shiny Chemical vs. TTET Union Corp | Shiny Chemical vs. Eternal Materials Co | Shiny Chemical vs. Yung Chi Paint |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
Other Complementary Tools
Economic Indicators Top statistical indicators that provide insights into how an economy is performing | |
Headlines Timeline Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity | |
Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. | |
Commodity Directory Find actively traded commodities issued by global exchanges |