Correlation Between China Steel and CHC Resources

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

Diversification Opportunities for China Steel and CHC Resources

0.0

Correlation Coefficient

China Steel  CHC Resources

Pay attention - limited upside

The 3 months correlation between China and CHC is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding China Steel Corp and CHC Resources Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHC Resources 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 CHC Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHC Resources Corp has no effect on the direction of China Steel i.e., China Steel and CHC Resources go up and down completely randomly.

Pair Corralation between China Steel and CHC Resources

Assuming the 90 days trading horizon China Steel Corp is expected to under-perform the CHC Resources. In addition to that, China Steel is 1.95 times more volatile than CHC Resources Corp. It trades about -0.41 of its total potential returns per unit of risk. CHC Resources Corp is currently generating about 0.11 per unit of volatility. If you would invest  6,650  in CHC Resources Corp on September 29, 2024 and sell it today you would earn a total of  80.00  from holding CHC Resources Corp or generate 1.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

China Steel Corp  vs.  CHC Resources Corp

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.

CHC Resources Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CHC Resources Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, CHC Resources 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 CHC Resources

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

The idea behind China Steel Corp and CHC Resources Corp 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.