Correlation Between Baker Steel and Polar Capital
Can any of the company-specific risk be diversified away by investing in both Baker Steel 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 Baker Steel and Polar Capital 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 Polar Capital Technology, you can compare the effects of market volatilities on Baker Steel 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 Baker Steel with a short position of Polar Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baker Steel and Polar Capital.
Diversification Opportunities for Baker Steel and Polar Capital
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Baker and Polar is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Baker Steel Resources 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 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 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 Baker Steel i.e., Baker Steel and Polar Capital go up and down completely randomly.
Pair Corralation between Baker Steel and Polar Capital
Assuming the 90 days trading horizon Baker Steel Resources is expected to under-perform the Polar Capital. But the stock apears to be less risky and, when comparing its historical volatility, Baker Steel Resources is 1.11 times less risky than Polar Capital. The stock trades about -0.29 of its potential returns per unit of risk. The Polar Capital Technology is currently generating about -0.15 of returns per unit of risk over similar time horizon. If you would invest 35,650 in Polar Capital Technology on November 28, 2024 and sell it today you would lose (2,050) from holding Polar Capital Technology or give up 5.75% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Baker Steel Resources vs. Polar Capital Technology
Performance |
| Timeline |
| Baker Steel Resources |
| Polar Capital Technology |
Baker Steel and Polar Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Baker Steel and Polar Capital
The main advantage of trading using opposite Baker Steel and Polar Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baker Steel 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.| Baker Steel vs. United States Steel | Baker Steel vs. Ondine Biomedical | Baker Steel vs. Naturhouse Health SA | Baker Steel vs. Creo Medical Group |
| Polar Capital vs. Spirent Communications plc | Polar Capital vs. Young Cos Brewery | Polar Capital vs. Verizon Communications | Polar Capital vs. Travel Leisure 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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