Correlation Between Companhia Siderurgica and Chung Hung

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

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

Diversification Opportunities for Companhia Siderurgica and Chung Hung

0.37

Correlation Coefficient

Companhia Siderurgica  Chung Hung

Weak diversification

The 3 months correlation between Companhia and Chung is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Companhia Siderurgica Nacional and Chung Hung Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chung Hung Steel and Companhia Siderurgica 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 Companhia Siderurgica Nacional are associated (or correlated) with Chung Hung. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chung Hung Steel has no effect on the direction of Companhia Siderurgica i.e., Companhia Siderurgica and Chung Hung go up and down completely randomly.

Pair Corralation between Companhia Siderurgica and Chung Hung

Considering the 90-day investment horizon Companhia Siderurgica is expected to generate 1.34 times less return on investment than Chung Hung. In addition to that, Companhia Siderurgica is 1.14 times more volatile than Chung Hung Steel. It trades about 0.11 of its total potential returns per unit of risk. Chung Hung Steel is currently generating about 0.16 per unit of volatility. If you would invest  1,805  in Chung Hung Steel on December 22, 2024 and sell it today you would earn a total of  515.00  from holding Chung Hung Steel or generate 28.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	93.33%
Values	Daily Returns

Companhia Siderurgica Nacional  vs.  Chung Hung Steel

Companhia Siderurgica

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Companhia Siderurgica Nacional are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak forward indicators, Companhia Siderurgica exhibited solid returns over the last few months and may actually be approaching a breakup point.

Chung Hung Steel

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chung Hung Steel are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Chung Hung showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Companhia Siderurgica and Chung Hung

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

The idea behind Companhia Siderurgica Nacional and Chung Hung Steel 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.