Correlation Between Steel Authority and MSP Steel
Can any of the company-specific risk be diversified away by investing in both Steel Authority and MSP 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 Steel Authority and MSP Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Authority of and MSP Steel Power, you can compare the effects of market volatilities on Steel Authority and MSP 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 Steel Authority with a short position of MSP Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Authority and MSP Steel.
Diversification Opportunities for Steel Authority and MSP Steel
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Steel and MSP is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Steel Authority of and MSP Steel Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MSP Steel Power and Steel Authority 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 Steel Authority of are associated (or correlated) with MSP Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MSP Steel Power has no effect on the direction of Steel Authority i.e., Steel Authority and MSP Steel go up and down completely randomly.
Pair Corralation between Steel Authority and MSP Steel
Assuming the 90 days trading horizon Steel Authority of is expected to under-perform the MSP Steel. But the stock apears to be less risky and, when comparing its historical volatility, Steel Authority of is 1.54 times less risky than MSP Steel. The stock trades about -0.2 of its potential returns per unit of risk. The MSP Steel Power is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest 5,416 in MSP Steel Power on August 30, 2024 and sell it today you would lose (940.00) from holding MSP Steel Power or give up 17.36% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 97.62% |
| Values | Daily Returns |
Steel Authority of vs. MSP Steel Power
Performance |
| Timeline |
| Steel Authority |
| MSP Steel Power |
Steel Authority and MSP Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Steel Authority and MSP Steel
The main advantage of trading using opposite Steel Authority and MSP Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Authority position performs unexpectedly, MSP 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 MSP Steel will offset losses from the drop in MSP Steel's long position.| Steel Authority vs. NMDC Limited | Steel Authority vs. Embassy Office Parks | Steel Authority vs. Gujarat Narmada Valley | Steel Authority vs. Gujarat Alkalies and |
| MSP Steel vs. NMDC Limited | MSP Steel vs. Embassy Office Parks | MSP Steel vs. Gujarat Narmada Valley | MSP Steel vs. Gujarat Alkalies and |
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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