Correlation Between East Africa and UNITED

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

Diversification Opportunities for East Africa and UNITED

0.47
  Correlation Coefficient

Very weak diversification

The 3 months correlation between East and UNITED is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding East Africa Metals and UNITED STS STL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UNITED STS STL and East Africa 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 East Africa Metals are associated (or correlated) with UNITED. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UNITED STS STL has no effect on the direction of East Africa i.e., East Africa and UNITED go up and down completely randomly.

Pair Corralation between East Africa and UNITED

Assuming the 90 days horizon East Africa Metals is expected to generate 40.34 times more return on investment than UNITED. However, East Africa is 40.34 times more volatile than UNITED STS STL. It trades about 0.09 of its potential returns per unit of risk. UNITED STS STL is currently generating about 0.02 per unit of risk. If you would invest  10.00  in East Africa Metals on September 14, 2024 and sell it today you would earn a total of  1.00  from holding East Africa Metals or generate 10.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy99.4%
ValuesDaily Returns

East Africa Metals  vs.  UNITED STS STL

 Performance 
       Timeline  
East Africa Metals 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days East Africa Metals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's primary indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.
UNITED STS STL 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in UNITED STS STL are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, UNITED is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

East Africa and UNITED Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with East Africa and UNITED

The main advantage of trading using opposite East Africa and UNITED positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if East Africa position performs unexpectedly, UNITED 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 UNITED will offset losses from the drop in UNITED's long position.
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The idea behind East Africa Metals and UNITED STS STL 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.
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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 Commodity Directory module to find actively traded commodities issued by global exchanges.

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