Correlation Between China Steel and WINSON Machinery

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

Diversification Opportunities for China Steel and WINSON Machinery

0.53

Correlation Coefficient

China Steel  WINSON Machinery

Very weak diversification

The 3 months correlation between China and WINSON is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding China Steel Corp and WINSON Machinery Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WINSON Machinery 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 WINSON Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WINSON Machinery has no effect on the direction of China Steel i.e., China Steel and WINSON Machinery go up and down completely randomly.

Pair Corralation between China Steel and WINSON Machinery

Assuming the 90 days trading horizon China Steel Corp is expected to under-perform the WINSON Machinery. But the stock apears to be less risky and, when comparing its historical volatility, China Steel Corp is 1.7 times less risky than WINSON Machinery. The stock trades about -0.19 of its potential returns per unit of risk. The WINSON Machinery Co is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  2,115  in WINSON Machinery Co on September 28, 2024 and sell it today you would lose (165.00) from holding WINSON Machinery Co or give up 7.8% of portfolio value over 90 days.

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

China Steel Corp  vs.  WINSON Machinery Co

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 abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

WINSON Machinery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WINSON Machinery Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with China Steel and WINSON Machinery

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

The idea behind China Steel Corp and WINSON Machinery Co 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.

Check out your portfolio center.

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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.