Correlation Between Companhia Siderurgica and Friedman Industries
Can any of the company-specific risk be diversified away by investing in both Companhia Siderurgica and Friedman Industries 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 Companhia Siderurgica and Friedman Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Companhia Siderurgica Nacional and Friedman Industries, you can compare the effects of market volatilities on Companhia Siderurgica and Friedman Industries 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 Companhia Siderurgica with a short position of Friedman Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Companhia Siderurgica and Friedman Industries.
Diversification Opportunities for Companhia Siderurgica and Friedman Industries
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Companhia and Friedman is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Companhia Siderurgica Nacional and Friedman Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Friedman Industries and Companhia Siderurgica 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 Companhia Siderurgica Nacional are associated (or correlated) with Friedman Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Friedman Industries has no effect on the direction of Companhia Siderurgica i.e., Companhia Siderurgica and Friedman Industries go up and down completely randomly.
Pair Corralation between Companhia Siderurgica and Friedman Industries
Considering the 90-day investment horizon Companhia Siderurgica Nacional is expected to generate 0.97 times more return on investment than Friedman Industries. However, Companhia Siderurgica Nacional is 1.03 times less risky than Friedman Industries. It trades about -0.04 of its potential returns per unit of risk. Friedman Industries is currently generating about -0.08 per unit of risk. If you would invest 203.00 in Companhia Siderurgica Nacional on August 24, 2024 and sell it today you would lose (7.00) from holding Companhia Siderurgica Nacional or give up 3.45% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Companhia Siderurgica Nacional vs. Friedman Industries
Performance |
| Timeline |
| Companhia Siderurgica |
| Friedman Industries |
Companhia Siderurgica and Friedman Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Companhia Siderurgica and Friedman Industries
The main advantage of trading using opposite Companhia Siderurgica and Friedman Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Companhia Siderurgica position performs unexpectedly, Friedman Industries 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 Friedman Industries will offset losses from the drop in Friedman Industries' long position.| Companhia Siderurgica vs. Ternium SA ADR | Companhia Siderurgica vs. ArcelorMittal SA ADR | Companhia Siderurgica vs. Commercial Metals | Companhia Siderurgica vs. Outokumpu Oyj ADR |
| Friedman Industries vs. Aperam PK | Friedman Industries vs. Acerinox SA ADR | Friedman Industries vs. Algoma Steel Group | Friedman Industries vs. Ferrexpo PLC |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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