Correlation Between Chia Yi and China Steel

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

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

Diversification Opportunities for Chia Yi and China Steel

-0.54

Correlation Coefficient

Chia Yi  China Steel

Excellent diversification

The 3 months correlation between Chia and China is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Chia Yi Steel and China Steel Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Steel Corp and Chia Yi 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 Chia Yi Steel 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 Corp has no effect on the direction of Chia Yi i.e., Chia Yi and China Steel go up and down completely randomly.

Pair Corralation between Chia Yi and China Steel

Assuming the 90 days trading horizon Chia Yi Steel is expected to generate 13.83 times more return on investment than China Steel. However, Chia Yi is 13.83 times more volatile than China Steel Corp. It trades about 0.04 of its potential returns per unit of risk. China Steel Corp is currently generating about -0.15 per unit of risk. If you would invest  1,045  in Chia Yi Steel on September 19, 2024 and sell it today you would earn a total of  60.00  from holding Chia Yi Steel or generate 5.74% return on investment over 90 days.

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

Chia Yi Steel  vs.  China Steel Corp

Chia Yi Steel

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Chia Yi Steel are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Chia Yi may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 comparatively stable basic indicators, China Steel is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Chia Yi and China Steel

The main advantage of trading using opposite Chia Yi and China Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chia Yi 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 Chia Yi Steel and China Steel 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.

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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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.