Correlation Between Maanshan Iron and Companhia Paranaense

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

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

Diversification Opportunities for Maanshan Iron and Companhia Paranaense

0.82

Correlation Coefficient

Maanshan Iron  Companhia Paranaense

Very poor diversification

The 3 months correlation between Maanshan and Companhia is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Maanshan Iron Steel and Companhia Paranaense de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Companhia Paranaense and Maanshan 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 Maanshan Iron Steel are associated (or correlated) with Companhia Paranaense. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Companhia Paranaense has no effect on the direction of Maanshan Iron i.e., Maanshan Iron and Companhia Paranaense go up and down completely randomly.

Pair Corralation between Maanshan Iron and Companhia Paranaense

Assuming the 90 days horizon Maanshan Iron Steel is expected to generate 1.21 times more return on investment than Companhia Paranaense. However, Maanshan Iron is 1.21 times more volatile than Companhia Paranaense de. It trades about 0.14 of its potential returns per unit of risk. Companhia Paranaense de is currently generating about 0.16 per unit of risk. If you would invest  18.00  in Maanshan Iron Steel on December 30, 2024 and sell it today you would earn a total of  4.00  from holding Maanshan Iron Steel or generate 22.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	93.55%
Values	Daily Returns

Maanshan Iron Steel  vs.  Companhia Paranaense de

Maanshan Iron Steel

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Maanshan Iron Steel are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Maanshan Iron reported solid returns over the last few months and may actually be approaching a breakup point.

Companhia Paranaense

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Companhia Paranaense de are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, Companhia Paranaense exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Maanshan Iron and Companhia Paranaense

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

The idea behind Maanshan Iron Steel and Companhia Paranaense de 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.