Correlation Between International Steels and United Bank
Can any of the company-specific risk be diversified away by investing in both International Steels and United Bank 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 United Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Steels and United Bank, you can compare the effects of market volatilities on International Steels and United Bank 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 United Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Steels and United Bank.
Diversification Opportunities for International Steels and United Bank
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between International and United is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding International Steels and United Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Bank 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 United Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Bank has no effect on the direction of International Steels i.e., International Steels and United Bank go up and down completely randomly.
Pair Corralation between International Steels and United Bank
Assuming the 90 days trading horizon International Steels is expected to generate 1.35 times less return on investment than United Bank. In addition to that, International Steels is 1.67 times more volatile than United Bank. It trades about 0.15 of its total potential returns per unit of risk. United Bank is currently generating about 0.33 per unit of volatility. If you would invest 35,450 in United Bank on October 24, 2024 and sell it today you would earn a total of 3,788 from holding United Bank or generate 10.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
International Steels vs. United Bank
Performance |
| Timeline |
| International Steels |
| United Bank |
International Steels and United Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Steels and United Bank
The main advantage of trading using opposite International Steels and United Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Steels position performs unexpectedly, United Bank 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 Bank will offset losses from the drop in United Bank's long position.| International Steels vs. Pakistan Reinsurance | International Steels vs. The Organic Meat | International Steels vs. National Foods | International Steels vs. Premier Insurance |
| United Bank vs. Amreli Steels | United Bank vs. International Steels | United Bank vs. Hi Tech Lubricants | United Bank vs. Ghandhara Automobile |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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