Correlation Between X Legend and China Steel

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

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

Diversification Opportunities for X Legend and China Steel

-0.29

Correlation Coefficient

X Legend  China Steel

Very good diversification

The 3 months correlation between 4994 and China is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding X Legend Entertainment Co 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 X Legend 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 X Legend Entertainment Co 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 X Legend i.e., X Legend and China Steel go up and down completely randomly.

Pair Corralation between X Legend and China Steel

Assuming the 90 days trading horizon X Legend Entertainment Co is expected to under-perform the China Steel. But the stock apears to be less risky and, when comparing its historical volatility, X Legend Entertainment Co is 1.07 times less risky than China Steel. The stock trades about -0.02 of its potential returns per unit of risk. The China Steel Corp is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,110  in China Steel Corp on September 5, 2024 and sell it today you would earn a total of  45.00  from holding China Steel Corp or generate 2.13% return on investment over 90 days.

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

X Legend Entertainment Co  vs.  China Steel Corp

X Legend Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days X Legend Entertainment Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, X Legend is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

China Steel Corp

Risk-Adjusted Performance

2 of 100

Weak

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

Pair Trading with X Legend and China Steel

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