Correlation Between China Steel and Gloria Material

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

Diversification Opportunities for China Steel and Gloria Material

0.28

Correlation Coefficient

China Steel  Gloria Material

Modest diversification

The 3 months correlation between China and Gloria is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding China Steel Corp and Gloria Material Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gloria Material Tech 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 Gloria Material. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gloria Material Tech has no effect on the direction of China Steel i.e., China Steel and Gloria Material go up and down completely randomly.

Pair Corralation between China Steel and Gloria Material

Assuming the 90 days trading horizon China Steel Corp is expected to under-perform the Gloria Material. But the stock apears to be less risky and, when comparing its historical volatility, China Steel Corp is 1.21 times less risky than Gloria Material. The stock trades about -0.09 of its potential returns per unit of risk. The Gloria Material Technology is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  5,038  in Gloria Material Technology on September 22, 2024 and sell it today you would lose (488.00) from holding Gloria Material Technology or give up 9.69% 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.  Gloria Material Technology

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 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.

Gloria Material Tech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gloria Material Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Gloria Material 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 Gloria Material

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

The idea behind China Steel Corp and Gloria Material Technology 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.