Correlation Between Friedman Industries and Worthington Steel
Can any of the company-specific risk be diversified away by investing in both Friedman Industries and Worthington Steel 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 Worthington Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Friedman Industries and Worthington Steel, you can compare the effects of market volatilities on Friedman Industries and Worthington Steel 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 Worthington Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Friedman Industries and Worthington Steel.
Diversification Opportunities for Friedman Industries and Worthington Steel
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Friedman and Worthington is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Friedman Industries and Worthington Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Worthington Steel 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 Worthington Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Worthington Steel has no effect on the direction of Friedman Industries i.e., Friedman Industries and Worthington Steel go up and down completely randomly.
Pair Corralation between Friedman Industries and Worthington Steel
Considering the 90-day investment horizon Friedman Industries is expected to generate 1.83 times less return on investment than Worthington Steel. But when comparing it to its historical volatility, Friedman Industries is 1.18 times less risky than Worthington Steel. It trades about 0.05 of its potential returns per unit of risk. Worthington Steel is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 2,461 in Worthington Steel on September 2, 2024 and sell it today you would earn a total of 2,023 from holding Worthington Steel or generate 82.2% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 51.41% |
Values | Daily Returns |
Friedman Industries vs. Worthington Steel
Performance |
Timeline |
Friedman Industries |
Worthington Steel |
Friedman Industries and Worthington Steel Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Friedman Industries and Worthington Steel
The main advantage of trading using opposite Friedman Industries and Worthington Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Friedman Industries position performs unexpectedly, Worthington Steel 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 Worthington Steel will offset losses from the drop in Worthington Steel's long position.Friedman Industries vs. Fortitude Gold Corp | Friedman Industries vs. New Gold | Friedman Industries vs. Galiano Gold | Friedman Industries vs. GoldMining |
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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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