Correlation Between Packages and Beco Steel

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Can any of the company-specific risk be diversified away by investing in both Packages and Beco 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 Packages and Beco Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Packages and Beco Steel, you can compare the effects of market volatilities on Packages and Beco 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 Packages with a short position of Beco Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Packages and Beco Steel.

Diversification Opportunities for Packages and Beco Steel

-0.09
  Correlation Coefficient

Good diversification

The 3 months correlation between Packages and Beco is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Packages and Beco Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beco Steel and Packages 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 Packages are associated (or correlated) with Beco Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beco Steel has no effect on the direction of Packages i.e., Packages and Beco Steel go up and down completely randomly.

Pair Corralation between Packages and Beco Steel

Assuming the 90 days trading horizon Packages is expected to generate 0.69 times more return on investment than Beco Steel. However, Packages is 1.44 times less risky than Beco Steel. It trades about 0.07 of its potential returns per unit of risk. Beco Steel is currently generating about -0.02 per unit of risk. If you would invest  32,160  in Packages on August 28, 2024 and sell it today you would earn a total of  24,639  from holding Packages or generate 76.61% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy96.74%
ValuesDaily Returns

Packages  vs.  Beco Steel

 Performance 
       Timeline  
Packages 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Packages are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Packages sustained solid returns over the last few months and may actually be approaching a breakup point.
Beco Steel 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Beco Steel are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Beco Steel may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Packages and Beco Steel Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Packages and Beco Steel

The main advantage of trading using opposite Packages and Beco Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Packages position performs unexpectedly, Beco 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 Beco Steel will offset losses from the drop in Beco Steel's long position.
The idea behind Packages and Beco Steel pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.

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