Correlation Between China Steel and Goldsun Building

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

Diversification Opportunities for China Steel and Goldsun Building

0.31

Correlation Coefficient

China Steel  Goldsun Building

Weak diversification

The 3 months correlation between China and Goldsun is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding China Steel Corp and Goldsun Building Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldsun Building Mat 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 Goldsun Building. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goldsun Building Mat has no effect on the direction of China Steel i.e., China Steel and Goldsun Building go up and down completely randomly.

Pair Corralation between China Steel and Goldsun Building

Assuming the 90 days trading horizon China Steel Corp is expected to generate 0.68 times more return on investment than Goldsun Building. However, China Steel Corp is 1.47 times less risky than Goldsun Building. It trades about -0.49 of its potential returns per unit of risk. Goldsun Building Materials is currently generating about -0.39 per unit of risk. If you would invest  2,210  in China Steel Corp on September 27, 2024 and sell it today you would lose (215.00) from holding China Steel Corp or give up 9.73% of portfolio value over 90 days.

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

China Steel Corp  vs.  Goldsun Building Materials

China Steel Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Steel Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Goldsun Building Mat

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Goldsun Building Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with China Steel and Goldsun Building

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

The idea behind China Steel Corp and Goldsun Building Materials 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.