Correlation Between Great Computer and China Steel

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

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

Diversification Opportunities for Great Computer and China Steel

0.42

Correlation Coefficient

Great Computer  China Steel

Very weak diversification

The 3 months correlation between Great and China is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Great Computer 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 Great Computer 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 Great Computer 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 Great Computer i.e., Great Computer and China Steel go up and down completely randomly.

Pair Corralation between Great Computer and China Steel

Assuming the 90 days trading horizon Great Computer is expected to under-perform the China Steel. In addition to that, Great Computer is 14.17 times more volatile than China Steel Corp. It trades about -0.07 of its total potential returns per unit of risk. China Steel Corp is currently generating about -0.16 per unit of volatility. If you would invest  4,105  in China Steel Corp on December 22, 2024 and sell it today you would lose (90.00) from holding China Steel Corp or give up 2.19% of portfolio value over 90 days.

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

Great Computer  vs.  China Steel Corp

Great Computer

Risk-Adjusted Performance

Very Weak

Over the last 90 days Great Computer 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

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 Great Computer and China Steel

The main advantage of trading using opposite Great Computer and China Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Great Computer 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 Great Computer 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .