Correlation Between Formetal and Ajusteel
Can any of the company-specific risk be diversified away by investing in both Formetal and Ajusteel 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 Formetal and Ajusteel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Formetal Co and Ajusteel Co, you can compare the effects of market volatilities on Formetal and Ajusteel 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 Formetal with a short position of Ajusteel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Formetal and Ajusteel.
Diversification Opportunities for Formetal and Ajusteel
Very weak diversification
The 3 months correlation between Formetal and Ajusteel is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Formetal Co and Ajusteel Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ajusteel and Formetal 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 Formetal Co are associated (or correlated) with Ajusteel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ajusteel has no effect on the direction of Formetal i.e., Formetal and Ajusteel go up and down completely randomly.
Pair Corralation between Formetal and Ajusteel
Assuming the 90 days trading horizon Formetal Co is expected to generate 0.99 times more return on investment than Ajusteel. However, Formetal Co is 1.01 times less risky than Ajusteel. It trades about -0.04 of its potential returns per unit of risk. Ajusteel Co is currently generating about -0.22 per unit of risk. If you would invest 282,000 in Formetal Co on August 28, 2024 and sell it today you would lose (13,000) from holding Formetal Co or give up 4.61% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Formetal Co vs. Ajusteel Co
Performance |
| Timeline |
| Formetal |
| Ajusteel |
Formetal and Ajusteel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Formetal and Ajusteel
The main advantage of trading using opposite Formetal and Ajusteel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Formetal position performs unexpectedly, Ajusteel 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 Ajusteel will offset losses from the drop in Ajusteel's long position.The idea behind Formetal Co and Ajusteel 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.| Ajusteel vs. Samyung Trading Co | Ajusteel vs. Formetal Co | Ajusteel vs. Daejung Chemicals Metals | Ajusteel vs. Seoyon Topmetal Co |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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