Correlation Between Maanshan Iron and Transocean

Can any of the company-specific risk be diversified away by investing in both Maanshan Iron and Transocean 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 Transocean 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 Transocean, you can compare the effects of market volatilities on Maanshan Iron and Transocean 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 Transocean. Check out your portfolio center. Please also check ongoing floating volatility patterns of Maanshan Iron and Transocean.

Diversification Opportunities for Maanshan Iron and Transocean

-0.41

Correlation Coefficient

Maanshan Iron  Transocean

Very good diversification

The 3 months correlation between Maanshan and Transocean is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Maanshan Iron Steel and Transocean in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transocean 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 Transocean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transocean has no effect on the direction of Maanshan Iron i.e., Maanshan Iron and Transocean go up and down completely randomly.

Pair Corralation between Maanshan Iron and Transocean

Assuming the 90 days horizon Maanshan Iron Steel is expected to generate 1.28 times more return on investment than Transocean. However, Maanshan Iron is 1.28 times more volatile than Transocean. It trades about 0.12 of its potential returns per unit of risk. Transocean is currently generating about -0.21 per unit of risk. If you would invest  18.00  in Maanshan Iron Steel on November 29, 2024 and sell it today you would earn a total of  3.00  from holding Maanshan Iron Steel or generate 16.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	68.33%
Values	Daily Returns

Maanshan Iron Steel  vs.  Transocean

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 9 (%) 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.

Transocean

Risk-Adjusted Performance

Very Weak

Over the last 90 days Transocean has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's forward indicators remain nearly stable which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Maanshan Iron and Transocean

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

The idea behind Maanshan Iron Steel and Transocean 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.