Correlation Between China Steel and Chailease Holding

Can any of the company-specific risk be diversified away by investing in both China Steel and Chailease Holding 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 Chailease Holding 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 Chailease Holding Co, you can compare the effects of market volatilities on China Steel and Chailease Holding 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 Chailease Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Steel and Chailease Holding.

Diversification Opportunities for China Steel and Chailease Holding

0.87

Correlation Coefficient

China Steel  Chailease Holding

Very poor diversification

The 3 months correlation between China and Chailease is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding China Steel Chemical and Chailease Holding Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chailease Holding 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 Chailease Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chailease Holding has no effect on the direction of China Steel i.e., China Steel and Chailease Holding go up and down completely randomly.

Pair Corralation between China Steel and Chailease Holding

Assuming the 90 days trading horizon China Steel is expected to generate 1.58 times less return on investment than Chailease Holding. But when comparing it to its historical volatility, China Steel Chemical is 2.3 times less risky than Chailease Holding. It trades about 0.12 of its potential returns per unit of risk. Chailease Holding Co is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  11,300  in Chailease Holding Co on December 31, 2024 and sell it today you would earn a total of  850.00  from holding Chailease Holding Co or generate 7.52% return on investment over 90 days.

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

China Steel Chemical  vs.  Chailease Holding Co

China Steel Chemical

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China Steel Chemical are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, China Steel is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Chailease Holding

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Chailease Holding Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Chailease Holding may actually be approaching a critical reversion point that can send shares even higher in May 2025.

Pair Trading with China Steel and Chailease Holding

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

The idea behind China Steel Chemical and Chailease Holding 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.

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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.