Correlation Between Delta Electronics and China Steel

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

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

Diversification Opportunities for Delta Electronics and China Steel

-0.77

Correlation Coefficient

Delta Electronics  China Steel

Pay attention - limited upside

The 3 months correlation between Delta and China is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Delta Electronics 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 Delta Electronics 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 Delta Electronics 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 Delta Electronics i.e., Delta Electronics and China Steel go up and down completely randomly.

Pair Corralation between Delta Electronics and China Steel

Assuming the 90 days trading horizon Delta Electronics is expected to under-perform the China Steel. In addition to that, Delta Electronics is 1.15 times more volatile than China Steel Corp. It trades about -0.09 of its total potential returns per unit of risk. China Steel Corp is currently generating about 0.13 per unit of volatility. If you would invest  1,985  in China Steel Corp on December 30, 2024 and sell it today you would earn a total of  315.00  from holding China Steel Corp or generate 15.87% return on investment over 90 days.

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

Delta Electronics  vs.  China Steel Corp

Delta Electronics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Delta Electronics 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 April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

China Steel Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China Steel Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, China Steel showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Delta Electronics and China Steel

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

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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.