Correlation Between Ta Chen and China Steel

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

By analyzing existing cross correlation between Ta Chen Stainless and China Steel Chemical, you can compare the effects of market volatilities on Ta Chen and China 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 Ta Chen with a short position of China Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ta Chen and China Steel.

Diversification Opportunities for Ta Chen and China Steel

0.68

Correlation Coefficient

Ta Chen  China Steel

Poor diversification

The 3 months correlation between 2027 and China is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Ta Chen Stainless and China Steel Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Steel Chemical and Ta Chen 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 Ta Chen Stainless are associated (or correlated) with China Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Steel Chemical has no effect on the direction of Ta Chen i.e., Ta Chen and China Steel go up and down completely randomly.

Pair Corralation between Ta Chen and China Steel

Assuming the 90 days trading horizon Ta Chen Stainless is expected to under-perform the China Steel. In addition to that, Ta Chen is 1.42 times more volatile than China Steel Chemical. It trades about -0.6 of its total potential returns per unit of risk. China Steel Chemical is currently generating about -0.48 per unit of volatility. If you would invest  9,900  in China Steel Chemical on September 24, 2024 and sell it today you would lose (780.00) from holding China Steel Chemical or give up 7.88% of portfolio value over 90 days.

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

Ta Chen Stainless  vs.  China Steel Chemical

Ta Chen Stainless

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ta Chen Stainless has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

China Steel Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Steel Chemical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Ta Chen and China Steel

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

The idea behind Ta Chen Stainless and China Steel Chemical 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.