Correlation Between China Resources and STEEL DYNAMICS

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

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

Diversification Opportunities for China Resources and STEEL DYNAMICS

0.12

Correlation Coefficient

China Resources  STEEL DYNAMICS

Average diversification

The 3 months correlation between China and STEEL is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding China Resources Beer and STEEL DYNAMICS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STEEL DYNAMICS and China Resources 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 China Resources Beer are associated (or correlated) with STEEL DYNAMICS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STEEL DYNAMICS has no effect on the direction of China Resources i.e., China Resources and STEEL DYNAMICS go up and down completely randomly.

Pair Corralation between China Resources and STEEL DYNAMICS

Assuming the 90 days horizon China Resources is expected to generate 1.83 times less return on investment than STEEL DYNAMICS. In addition to that, China Resources is 1.34 times more volatile than STEEL DYNAMICS. It trades about 0.02 of its total potential returns per unit of risk. STEEL DYNAMICS is currently generating about 0.05 per unit of volatility. If you would invest  10,942  in STEEL DYNAMICS on December 20, 2024 and sell it today you would earn a total of  596.00  from holding STEEL DYNAMICS or generate 5.45% return on investment over 90 days.

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

China Resources Beer  vs.  STEEL DYNAMICS

China Resources Beer

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in China Resources Beer are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, China Resources is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

STEEL DYNAMICS

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in STEEL DYNAMICS are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, STEEL DYNAMICS may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with China Resources and STEEL DYNAMICS

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

The idea behind China Resources Beer and STEEL DYNAMICS 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.