Correlation Between MAANSHAN IRON and PT Steel

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

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

Diversification Opportunities for MAANSHAN IRON and PT Steel

-0.64

Correlation Coefficient

MAANSHAN IRON  PT Steel

Excellent diversification

The 3 months correlation between MAANSHAN and S08 is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding MAANSHAN IRON H and PT Steel Pipe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Steel Pipe 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 H are associated (or correlated) with PT Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Steel Pipe has no effect on the direction of MAANSHAN IRON i.e., MAANSHAN IRON and PT Steel go up and down completely randomly.

Pair Corralation between MAANSHAN IRON and PT Steel

Assuming the 90 days trading horizon MAANSHAN IRON H is expected to generate 0.73 times more return on investment than PT Steel. However, MAANSHAN IRON H is 1.37 times less risky than PT Steel. It trades about 0.04 of its potential returns per unit of risk. PT Steel Pipe is currently generating about 0.03 per unit of risk. If you would invest  14.00  in MAANSHAN IRON H on October 24, 2024 and sell it today you would earn a total of  7.00  from holding MAANSHAN IRON H or generate 50.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.76%
Values	Daily Returns

MAANSHAN IRON H   vs.  PT Steel Pipe

MAANSHAN IRON H

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MAANSHAN IRON H are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, MAANSHAN IRON unveiled solid returns over the last few months and may actually be approaching a breakup point.

PT Steel Pipe

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with MAANSHAN IRON and PT Steel

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

The idea behind MAANSHAN IRON H and PT Steel Pipe 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.