Correlation Between Chukai Public and City Steel

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

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

Diversification Opportunities for Chukai Public and City Steel

0.44

Correlation Coefficient

Chukai Public  City Steel

Very weak diversification

The 3 months correlation between Chukai and City is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Chukai Public and City Steel Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on City Steel Public and Chukai Public 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 Chukai Public are associated (or correlated) with City Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of City Steel Public has no effect on the direction of Chukai Public i.e., Chukai Public and City Steel go up and down completely randomly.

Pair Corralation between Chukai Public and City Steel

Assuming the 90 days trading horizon Chukai Public is expected to under-perform the City Steel. In addition to that, Chukai Public is 1.72 times more volatile than City Steel Public. It trades about -0.34 of its total potential returns per unit of risk. City Steel Public is currently generating about -0.07 per unit of volatility. If you would invest  196.00  in City Steel Public on October 6, 2024 and sell it today you would lose (8.00) from holding City Steel Public or give up 4.08% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	97.56%
Values	Daily Returns

Chukai Public  vs.  City Steel Public

Chukai Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chukai Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

City Steel Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days City Steel Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, City Steel is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Chukai Public and City Steel

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

The idea behind Chukai Public and City Steel Public 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.