Correlation Between United States and Polar Capital

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Can any of the company-specific risk be diversified away by investing in both United States and Polar Capital 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 United States and Polar Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United States Steel and Polar Capital Technology, you can compare the effects of market volatilities on United States and Polar Capital 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 United States with a short position of Polar Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of United States and Polar Capital.

Diversification Opportunities for United States and Polar Capital

0.72
  Correlation Coefficient

Poor diversification

The 3 months correlation between United and Polar is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel and Polar Capital Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Polar Capital Technology and United States 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 United States Steel are associated (or correlated) with Polar Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Polar Capital Technology has no effect on the direction of United States i.e., United States and Polar Capital go up and down completely randomly.

Pair Corralation between United States and Polar Capital

Assuming the 90 days trading horizon United States Steel is expected to under-perform the Polar Capital. In addition to that, United States is 2.62 times more volatile than Polar Capital Technology. It trades about -0.01 of its total potential returns per unit of risk. Polar Capital Technology is currently generating about 0.31 per unit of volatility. If you would invest  30,900  in Polar Capital Technology on September 6, 2024 and sell it today you would earn a total of  3,450  from holding Polar Capital Technology or generate 11.17% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

United States Steel  vs.  Polar Capital Technology

 Performance 
       Timeline  
United States Steel 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in United States Steel are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, United States unveiled solid returns over the last few months and may actually be approaching a breakup point.
Polar Capital Technology 

Risk-Adjusted Performance

20 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Polar Capital Technology are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Polar Capital exhibited solid returns over the last few months and may actually be approaching a breakup point.

United States and Polar Capital Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with United States and Polar Capital

The main advantage of trading using opposite United States and Polar Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United States position performs unexpectedly, Polar Capital 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 Polar Capital will offset losses from the drop in Polar Capital's long position.
The idea behind United States Steel and Polar Capital Technology 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.

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