Correlation Between First Steamship and CSBC Corp

Can any of the company-specific risk be diversified away by investing in both First Steamship and CSBC Corp 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 First Steamship and CSBC Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between First Steamship Co and CSBC Corp Taiwan, you can compare the effects of market volatilities on First Steamship and CSBC Corp 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 First Steamship with a short position of CSBC Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Steamship and CSBC Corp.

Diversification Opportunities for First Steamship and CSBC Corp

0.47

Correlation Coefficient

First Steamship  CSBC Corp

Very weak diversification

The 3 months correlation between First and CSBC is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding First Steamship Co and CSBC Corp Taiwan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSBC Corp Taiwan and First Steamship 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 First Steamship Co are associated (or correlated) with CSBC Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CSBC Corp Taiwan has no effect on the direction of First Steamship i.e., First Steamship and CSBC Corp go up and down completely randomly.

Pair Corralation between First Steamship and CSBC Corp

Assuming the 90 days trading horizon First Steamship Co is expected to generate 1.75 times more return on investment than CSBC Corp. However, First Steamship is 1.75 times more volatile than CSBC Corp Taiwan. It trades about 0.04 of its potential returns per unit of risk. CSBC Corp Taiwan is currently generating about -0.11 per unit of risk. If you would invest  719.00  in First Steamship Co on September 14, 2024 and sell it today you would earn a total of  24.00  from holding First Steamship Co or generate 3.34% return on investment over 90 days.

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

First Steamship Co  vs.  CSBC Corp Taiwan

First Steamship

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in First Steamship Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, First Steamship is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

CSBC Corp Taiwan

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CSBC Corp Taiwan 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 First Steamship and CSBC Corp

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

The idea behind First Steamship Co and CSBC Corp Taiwan 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.