Correlation Between Century Iron and China Steel

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

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

Diversification Opportunities for Century Iron and China Steel

0.88

Correlation Coefficient

Century Iron  China Steel

Very poor diversification

The 3 months correlation between Century and China is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Century Iron And 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 Century Iron 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 Century Iron And 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 Century Iron i.e., Century Iron and China Steel go up and down completely randomly.

Pair Corralation between Century Iron and China Steel

Assuming the 90 days trading horizon Century Iron is expected to generate 1.84 times less return on investment than China Steel. In addition to that, Century Iron is 1.16 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 0.15 per unit of volatility. If you would invest  1,985  in China Steel Corp on December 28, 2024 and sell it today you would earn a total of  360.00  from holding China Steel Corp or generate 18.14% return on investment over 90 days.

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

Century Iron And  vs.  China Steel Corp

Century Iron And

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Century Iron And are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Century Iron may actually be approaching a critical reversion point that can send shares even higher in April 2025.

China Steel Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in China Steel Corp are ranked lower than 12 (%) 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 Century Iron and China Steel

The main advantage of trading using opposite Century Iron and China Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Century Iron 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 Century Iron And 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.