Correlation Between Friedman Industries and Constellium
Can any of the company-specific risk be diversified away by investing in both Friedman Industries and Constellium 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 Friedman Industries and Constellium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Friedman Industries and Constellium Nv, you can compare the effects of market volatilities on Friedman Industries and Constellium 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 Friedman Industries with a short position of Constellium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Friedman Industries and Constellium.
Diversification Opportunities for Friedman Industries and Constellium
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between Friedman and Constellium is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Friedman Industries and Constellium Nv in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Constellium Nv and Friedman Industries 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 Friedman Industries are associated (or correlated) with Constellium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Constellium Nv has no effect on the direction of Friedman Industries i.e., Friedman Industries and Constellium go up and down completely randomly.
Pair Corralation between Friedman Industries and Constellium
Considering the 90-day investment horizon Friedman Industries is expected to generate 0.83 times more return on investment than Constellium. However, Friedman Industries is 1.21 times less risky than Constellium. It trades about 0.09 of its potential returns per unit of risk. Constellium Nv is currently generating about -0.1 per unit of risk. If you would invest 1,399 in Friedman Industries on September 12, 2024 and sell it today you would earn a total of 246.00 from holding Friedman Industries or generate 17.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Friedman Industries vs. Constellium Nv
Performance |
| Timeline |
| Friedman Industries |
| Constellium Nv |
Friedman Industries and Constellium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Friedman Industries and Constellium
The main advantage of trading using opposite Friedman Industries and Constellium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Friedman Industries position performs unexpectedly, Constellium 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 Constellium will offset losses from the drop in Constellium's long position.| Friedman Industries vs. ArcelorMittal SA | Friedman Industries vs. Aperam PK | Friedman Industries vs. Acerinox SA ADR | Friedman Industries vs. Algoma Steel Group |
| Constellium vs. Century Aluminum | Constellium vs. Alcoa Corp | Constellium vs. China Hongqiao Group | Constellium vs. Norsk Hydro ASA |
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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