Correlation Between Simple Mart and China Steel
Can any of the company-specific risk be diversified away by investing in both Simple Mart 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 Simple Mart and China Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Simple Mart Retail and China Steel Corp, you can compare the effects of market volatilities on Simple Mart 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 Simple Mart with a short position of China Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Simple Mart and China Steel.
Diversification Opportunities for Simple Mart and China Steel
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Simple and China is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Simple Mart Retail 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 Simple Mart 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 Simple Mart Retail 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 Simple Mart i.e., Simple Mart and China Steel go up and down completely randomly.
Pair Corralation between Simple Mart and China Steel
Assuming the 90 days trading horizon Simple Mart Retail is expected to under-perform the China Steel. In addition to that, Simple Mart is 2.21 times more volatile than China Steel Corp. It trades about -0.29 of its total potential returns per unit of risk. China Steel Corp is currently generating about -0.48 per unit of volatility. If you would invest 4,170 in China Steel Corp on October 9, 2024 and sell it today you would lose (135.00) from holding China Steel Corp or give up 3.24% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Simple Mart Retail vs. China Steel Corp
Performance |
Timeline |
Simple Mart Retail |
China Steel Corp |
Simple Mart and China Steel Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Simple Mart and China Steel
The main advantage of trading using opposite Simple Mart and China Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Simple Mart 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.Simple Mart vs. Taiwan Semiconductor Manufacturing | Simple Mart vs. Hon Hai Precision | Simple Mart vs. MediaTek | Simple Mart vs. Chunghwa Telecom Co |
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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 Global Correlations module to find global opportunities by holding instruments from different markets.
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