Correlation Between China Steel and Cleanaway

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

Diversification Opportunities for China Steel and Cleanaway

0.88

Correlation Coefficient

China Steel  Cleanaway

Very poor diversification

The 3 months correlation between China and Cleanaway is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding China Steel Chemical and Cleanaway Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cleanaway 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 Cleanaway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cleanaway has no effect on the direction of China Steel i.e., China Steel and Cleanaway go up and down completely randomly.

Pair Corralation between China Steel and Cleanaway

Assuming the 90 days trading horizon China Steel is expected to generate 1.16 times less return on investment than Cleanaway. In addition to that, China Steel is 1.5 times more volatile than Cleanaway Co. It trades about 0.16 of its total potential returns per unit of risk. Cleanaway Co is currently generating about 0.28 per unit of volatility. If you would invest  17,950  in Cleanaway Co on December 24, 2024 and sell it today you would earn a total of  1,500  from holding Cleanaway Co or generate 8.36% 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.  Cleanaway Co

China Steel Chemical

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in China Steel Chemical are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, China Steel may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Cleanaway

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cleanaway Co are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Cleanaway may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with China Steel and Cleanaway

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

The idea behind China Steel Chemical and Cleanaway 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.