Correlation Between CIMB Group and China Steel

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

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

Diversification Opportunities for CIMB Group and China Steel

0.0

Correlation Coefficient

CIMB Group  China Steel

Pay attention - limited upside

The 3 months correlation between CIMB and China is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding CIMB Group Holdings and China Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Steel and CIMB Group 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 CIMB Group Holdings are associated (or correlated) with China Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Steel has no effect on the direction of CIMB Group i.e., CIMB Group and China Steel go up and down completely randomly.

Pair Corralation between CIMB Group and China Steel

If you would invest  1,117  in China Steel on February 4, 2024 and sell it today you would earn a total of  1,760  from holding China Steel or generate 157.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	78.74%
Values	Daily Returns

CIMB Group Holdings  vs.  China Steel

CIMB Group Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CIMB Group Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, CIMB Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

China Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Steel has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, China Steel is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with CIMB Group and China Steel

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

The idea behind CIMB Group Holdings and China 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.