Correlation Between Commercial Metals and Huadi International
Can any of the company-specific risk be diversified away by investing in both Commercial Metals and Huadi International 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 Commercial Metals and Huadi International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Commercial Metals and Huadi International Group, you can compare the effects of market volatilities on Commercial Metals and Huadi International 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 Commercial Metals with a short position of Huadi International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commercial Metals and Huadi International.
Diversification Opportunities for Commercial Metals and Huadi International
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Commercial and Huadi is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Commercial Metals and Huadi International Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huadi International and Commercial Metals 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 Commercial Metals are associated (or correlated) with Huadi International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huadi International has no effect on the direction of Commercial Metals i.e., Commercial Metals and Huadi International go up and down completely randomly.
Pair Corralation between Commercial Metals and Huadi International
Considering the 90-day investment horizon Commercial Metals is expected to generate 17.62 times less return on investment than Huadi International. But when comparing it to its historical volatility, Commercial Metals is 8.96 times less risky than Huadi International. It trades about 0.01 of its potential returns per unit of risk. Huadi International Group is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 409.00 in Huadi International Group on November 28, 2024 and sell it today you would lose (236.00) from holding Huadi International Group or give up 57.7% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Commercial Metals vs. Huadi International Group
Performance |
| Timeline |
| Commercial Metals |
| Huadi International |
Commercial Metals and Huadi International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Commercial Metals and Huadi International
The main advantage of trading using opposite Commercial Metals and Huadi International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commercial Metals position performs unexpectedly, Huadi International 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 Huadi International will offset losses from the drop in Huadi International's long position.| Commercial Metals vs. Olympic Steel | Commercial Metals vs. Steel Dynamics | Commercial Metals vs. Nucor Corp | Commercial Metals vs. POSCO Holdings |
| Huadi International vs. Olympic Steel | Huadi International vs. Steel Dynamics | Huadi International vs. Commercial Metals | Huadi International vs. Nucor Corp |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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