Correlation Between China Steel and Eva Airways

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

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

Diversification Opportunities for China Steel and Eva Airways

0.17

Correlation Coefficient

China Steel  Eva Airways

Average diversification

The 3 months correlation between China and Eva is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding China Steel Corp and Eva Airways Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eva Airways Corp and China Steel 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 China Steel Corp are associated (or correlated) with Eva Airways. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eva Airways Corp has no effect on the direction of China Steel i.e., China Steel and Eva Airways go up and down completely randomly.

Pair Corralation between China Steel and Eva Airways

Assuming the 90 days trading horizon China Steel Corp is expected to under-perform the Eva Airways. In addition to that, China Steel is 1.15 times more volatile than Eva Airways Corp. It trades about -0.03 of its total potential returns per unit of risk. Eva Airways Corp is currently generating about 0.19 per unit of volatility. If you would invest  3,540  in Eva Airways Corp on September 2, 2024 and sell it today you would earn a total of  615.00  from holding Eva Airways Corp or generate 17.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

China Steel Corp  vs.  Eva Airways Corp

China Steel Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Steel Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, China Steel is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Eva Airways Corp

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Eva Airways Corp are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Eva Airways showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Steel and Eva Airways

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

The idea behind China Steel Corp and Eva Airways Corp 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.