Correlation Between Metropolitan Steel and KSB Pumps
Can any of the company-specific risk be diversified away by investing in both Metropolitan Steel and KSB Pumps 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 Metropolitan Steel and KSB Pumps into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Metropolitan Steel Corp and KSB Pumps, you can compare the effects of market volatilities on Metropolitan Steel and KSB Pumps 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 Metropolitan Steel with a short position of KSB Pumps. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metropolitan Steel and KSB Pumps.
Diversification Opportunities for Metropolitan Steel and KSB Pumps
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Metropolitan and KSB is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Metropolitan Steel Corp and KSB Pumps in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KSB Pumps and Metropolitan Steel 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 Metropolitan Steel Corp are associated (or correlated) with KSB Pumps. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KSB Pumps has no effect on the direction of Metropolitan Steel i.e., Metropolitan Steel and KSB Pumps go up and down completely randomly.
Pair Corralation between Metropolitan Steel and KSB Pumps
Assuming the 90 days trading horizon Metropolitan Steel Corp is expected to under-perform the KSB Pumps. In addition to that, Metropolitan Steel is 1.0 times more volatile than KSB Pumps. It trades about -0.03 of its total potential returns per unit of risk. KSB Pumps is currently generating about 0.09 per unit of volatility. If you would invest 12,995 in KSB Pumps on October 25, 2024 and sell it today you would earn a total of 1,899 from holding KSB Pumps or generate 14.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 98.41% |
| Values | Daily Returns |
Metropolitan Steel Corp vs. KSB Pumps
Performance |
| Timeline |
| Metropolitan Steel Corp |
| KSB Pumps |
Metropolitan Steel and KSB Pumps Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Metropolitan Steel and KSB Pumps
The main advantage of trading using opposite Metropolitan Steel and KSB Pumps positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metropolitan Steel position performs unexpectedly, KSB Pumps 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 KSB Pumps will offset losses from the drop in KSB Pumps' long position.| Metropolitan Steel vs. Matco Foods | Metropolitan Steel vs. JS Investments | Metropolitan Steel vs. Crescent Steel Allied | Metropolitan Steel vs. Beco Steel |
| KSB Pumps vs. Quice Food Industries | KSB Pumps vs. Pakistan Aluminium Beverage | KSB Pumps vs. Metropolitan Steel Corp | KSB Pumps vs. Honda Atlas Cars |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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