Correlation Between China Steel and Ablerex Electronics

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

Diversification Opportunities for China Steel and Ablerex Electronics

-0.22

Correlation Coefficient

China Steel  Ablerex Electronics

Very good diversification

The 3 months correlation between China and Ablerex is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding China Steel Corp and Ablerex Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ablerex Electronics 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 Ablerex Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ablerex Electronics has no effect on the direction of China Steel i.e., China Steel and Ablerex Electronics go up and down completely randomly.

Pair Corralation between China Steel and Ablerex Electronics

Assuming the 90 days trading horizon China Steel Corp is expected to under-perform the Ablerex Electronics. But the stock apears to be less risky and, when comparing its historical volatility, China Steel Corp is 2.24 times less risky than Ablerex Electronics. The stock trades about -0.17 of its potential returns per unit of risk. The Ablerex Electronics Co is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  4,320  in Ablerex Electronics Co on October 23, 2024 and sell it today you would earn a total of  50.00  from holding Ablerex Electronics Co or generate 1.16% return on investment over 90 days.

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

China Steel Corp  vs.  Ablerex Electronics Co

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 February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Ablerex Electronics

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ablerex Electronics Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Ablerex Electronics is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with China Steel and Ablerex Electronics

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

The idea behind China Steel Corp and Ablerex Electronics 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.