Correlation Between Baker Steel and CVR Energy
Can any of the company-specific risk be diversified away by investing in both Baker Steel and CVR Energy 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 Baker Steel and CVR Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Baker Steel Resources and CVR Energy, you can compare the effects of market volatilities on Baker Steel and CVR Energy 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 Baker Steel with a short position of CVR Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baker Steel and CVR Energy.
Diversification Opportunities for Baker Steel and CVR Energy
-0.24 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Baker and CVR is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Baker Steel Resources and CVR Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVR Energy and Baker 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 Baker Steel Resources are associated (or correlated) with CVR Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVR Energy has no effect on the direction of Baker Steel i.e., Baker Steel and CVR Energy go up and down completely randomly.
Pair Corralation between Baker Steel and CVR Energy
Assuming the 90 days trading horizon Baker Steel Resources is expected to generate 1.43 times more return on investment than CVR Energy. However, Baker Steel is 1.43 times more volatile than CVR Energy. It trades about 0.03 of its potential returns per unit of risk. CVR Energy is currently generating about 0.0 per unit of risk. If you would invest 4,750 in Baker Steel Resources on August 29, 2024 and sell it today you would earn a total of 850.00 from holding Baker Steel Resources or generate 17.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 88.64% |
| Values | Daily Returns |
Baker Steel Resources vs. CVR Energy
Performance |
| Timeline |
| Baker Steel Resources |
| CVR Energy |
Baker Steel and CVR Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Baker Steel and CVR Energy
The main advantage of trading using opposite Baker Steel and CVR Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baker Steel position performs unexpectedly, CVR Energy 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 CVR Energy will offset losses from the drop in CVR Energy's long position.| Baker Steel vs. Spirent Communications plc | Baker Steel vs. Jacquet Metal Service | Baker Steel vs. Silvercorp Metals | Baker Steel vs. Fulcrum Metals PLC |
| CVR Energy vs. Zurich Insurance Group | CVR Energy vs. American Homes 4 | CVR Energy vs. Zoom Video Communications | CVR Energy vs. United Airlines Holdings |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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