Correlation Between Chun Yuan and Iron Force

Can any of the company-specific risk be diversified away by investing in both Chun Yuan and Iron Force 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 Iron Force 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 Iron Force Industrial, you can compare the effects of market volatilities on Chun Yuan and Iron Force 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 Iron Force. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chun Yuan and Iron Force.

Diversification Opportunities for Chun Yuan and Iron Force

-0.2

Correlation Coefficient

Chun Yuan  Iron Force

Good diversification

The 3 months correlation between Chun and Iron is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Chun Yuan Steel and Iron Force Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iron Force Industrial 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 Iron Force. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iron Force Industrial has no effect on the direction of Chun Yuan i.e., Chun Yuan and Iron Force go up and down completely randomly.

Pair Corralation between Chun Yuan and Iron Force

Assuming the 90 days trading horizon Chun Yuan Steel is expected to generate 0.61 times more return on investment than Iron Force. However, Chun Yuan Steel is 1.64 times less risky than Iron Force. It trades about 0.07 of its potential returns per unit of risk. Iron Force Industrial is currently generating about -0.1 per unit of risk. If you would invest  1,750  in Chun Yuan Steel on September 14, 2024 and sell it today you would earn a total of  105.00  from holding Chun Yuan Steel or generate 6.0% return on investment over 90 days.

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

Chun Yuan Steel  vs.  Iron Force Industrial

Chun Yuan Steel

Risk-Adjusted Performance

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chun Yuan Steel are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Chun Yuan may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Iron Force Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Iron Force Industrial 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.

Pair Trading with Chun Yuan and Iron Force

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

The idea behind Chun Yuan Steel and Iron Force Industrial 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.