Correlation Between China Steel and Sesoda Corp
Can any of the company-specific risk be diversified away by investing in both China Steel and Sesoda Corp 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 Sesoda Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Steel Corp and Sesoda Corp, you can compare the effects of market volatilities on China Steel and Sesoda Corp 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 Sesoda Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Steel and Sesoda Corp.
Diversification Opportunities for China Steel and Sesoda Corp
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between China and Sesoda is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding China Steel Corp and Sesoda Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sesoda Corp 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 Corp are associated (or correlated) with Sesoda Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sesoda Corp has no effect on the direction of China Steel i.e., China Steel and Sesoda Corp go up and down completely randomly.
Pair Corralation between China Steel and Sesoda Corp
Assuming the 90 days trading horizon China Steel Corp is expected to generate 0.6 times more return on investment than Sesoda Corp. However, China Steel Corp is 1.66 times less risky than Sesoda Corp. It trades about -0.52 of its potential returns per unit of risk. Sesoda Corp is currently generating about -0.39 per unit of risk. If you would invest 2,230 in China Steel Corp on September 24, 2024 and sell it today you would lose (230.00) from holding China Steel Corp or give up 10.31% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 95.45% |
Values | Daily Returns |
China Steel Corp vs. Sesoda Corp
Performance |
Timeline |
China Steel Corp |
Sesoda Corp |
China Steel and Sesoda Corp Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with China Steel and Sesoda Corp
The main advantage of trading using opposite China Steel and Sesoda Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Steel position performs unexpectedly, Sesoda Corp 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 Sesoda Corp will offset losses from the drop in Sesoda Corp's long position.China Steel vs. Formosa Plastics Corp | China Steel vs. Formosa Chemicals Fibre | China Steel vs. Formosa Petrochemical Corp | China Steel vs. Cathay Financial Holding |
Sesoda Corp vs. Formosa Plastics Corp | Sesoda Corp vs. Formosa Chemicals Fibre | Sesoda Corp vs. China Steel Corp | Sesoda Corp vs. Formosa Petrochemical 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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