Correlation Between China Steel and Tycoons Worldwide

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

Diversification Opportunities for China Steel and Tycoons Worldwide

0.43

Correlation Coefficient

China Steel  Tycoons Worldwide

Very weak diversification

The 3 months correlation between China and Tycoons is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding China Steel Corp and Tycoons Worldwide Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tycoons Worldwide 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 Tycoons Worldwide. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tycoons Worldwide has no effect on the direction of China Steel i.e., China Steel and Tycoons Worldwide go up and down completely randomly.

Pair Corralation between China Steel and Tycoons Worldwide

Assuming the 90 days trading horizon China Steel Corp is expected to under-perform the Tycoons Worldwide. But the stock apears to be less risky and, when comparing its historical volatility, China Steel Corp is 1.2 times less risky than Tycoons Worldwide. The stock trades about -0.06 of its potential returns per unit of risk. The Tycoons Worldwide Group is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  522.00  in Tycoons Worldwide Group on September 23, 2024 and sell it today you would lose (23.00) from holding Tycoons Worldwide Group or give up 4.41% 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.  Tycoons Worldwide Group

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.

Tycoons Worldwide

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tycoons Worldwide Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Tycoons Worldwide is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with China Steel and Tycoons Worldwide

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

The idea behind China Steel Corp and Tycoons Worldwide Group 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.