Correlation Between International Steels and Packages
Can any of the company-specific risk be diversified away by investing in both International Steels and Packages 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 International Steels and Packages into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Steels and Packages, you can compare the effects of market volatilities on International Steels and Packages 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 International Steels with a short position of Packages. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Steels and Packages.
Diversification Opportunities for International Steels and Packages
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between International and Packages is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding International Steels and Packages in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Packages and International Steels 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 International Steels are associated (or correlated) with Packages. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Packages has no effect on the direction of International Steels i.e., International Steels and Packages go up and down completely randomly.
Pair Corralation between International Steels and Packages
Assuming the 90 days trading horizon International Steels is expected to under-perform the Packages. But the stock apears to be less risky and, when comparing its historical volatility, International Steels is 1.26 times less risky than Packages. The stock trades about -0.25 of its potential returns per unit of risk. The Packages is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest 54,527 in Packages on November 28, 2024 and sell it today you would lose (803.00) from holding Packages or give up 1.47% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
International Steels vs. Packages
Performance |
| Timeline |
| International Steels |
| Packages |
International Steels and Packages Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Steels and Packages
The main advantage of trading using opposite International Steels and Packages positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Steels position performs unexpectedly, Packages 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 Packages will offset losses from the drop in Packages' long position.| International Steels vs. EFU General Insurance | International Steels vs. Universal Insurance | International Steels vs. Pakistan Reinsurance | International Steels vs. Wah Nobel Chemicals |
| Packages vs. Metropolitan Steel Corp | Packages vs. Standard Chartered Bank | Packages vs. National Bank of | Packages vs. Orient Rental Modaraba |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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