Correlation Between Chun Yuan and Mayer Steel

Can any of the company-specific risk be diversified away by investing in both Chun Yuan and Mayer Steel 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 Chun Yuan and Mayer Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Chun Yuan Steel and Mayer Steel Pipe, you can compare the effects of market volatilities on Chun Yuan and Mayer Steel 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 Chun Yuan with a short position of Mayer Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chun Yuan and Mayer Steel.

Diversification Opportunities for Chun Yuan and Mayer Steel

0.56

Correlation Coefficient

Chun Yuan  Mayer Steel

Very weak diversification

The 3 months correlation between Chun and Mayer is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Chun Yuan Steel and Mayer Steel Pipe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mayer Steel Pipe and Chun Yuan 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 Chun Yuan Steel are associated (or correlated) with Mayer Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mayer Steel Pipe has no effect on the direction of Chun Yuan i.e., Chun Yuan and Mayer Steel go up and down completely randomly.

Pair Corralation between Chun Yuan and Mayer Steel

Assuming the 90 days trading horizon Chun Yuan Steel is expected to generate 0.73 times more return on investment than Mayer Steel. However, Chun Yuan Steel is 1.37 times less risky than Mayer Steel. It trades about 0.2 of its potential returns per unit of risk. Mayer Steel Pipe is currently generating about 0.02 per unit of risk. If you would invest  1,805  in Chun Yuan Steel on December 29, 2024 and sell it today you would earn a total of  255.00  from holding Chun Yuan Steel or generate 14.13% return on investment over 90 days.

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

Chun Yuan Steel  vs.  Mayer Steel Pipe

Chun Yuan Steel

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Chun Yuan Steel are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Chun Yuan showed solid returns over the last few months and may actually be approaching a breakup point.

Mayer Steel Pipe

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Mayer Steel Pipe are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Mayer Steel 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 Chun Yuan and Mayer Steel

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

The idea behind Chun Yuan Steel and Mayer Steel Pipe 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.