Correlation Between Universal Stainless and Friedman Industries
Can any of the company-specific risk be diversified away by investing in both Universal Stainless 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 Universal Stainless and Friedman Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Universal Stainless Alloy and Friedman Industries, you can compare the effects of market volatilities on Universal Stainless 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 Universal Stainless with a short position of Friedman Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Stainless and Friedman Industries.
Diversification Opportunities for Universal Stainless and Friedman Industries
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Universal and Friedman is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Universal Stainless Alloy and Friedman Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Friedman Industries and Universal Stainless 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 Universal Stainless Alloy 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 Universal Stainless i.e., Universal Stainless and Friedman Industries go up and down completely randomly.
Pair Corralation between Universal Stainless and Friedman Industries
Given the investment horizon of 90 days Universal Stainless is expected to generate 5.07 times less return on investment than Friedman Industries. But when comparing it to its historical volatility, Universal Stainless Alloy is 9.92 times less risky than Friedman Industries. It trades about 0.19 of its potential returns per unit of risk. Friedman Industries is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 1,408 in Friedman Industries on August 27, 2024 and sell it today you would earn a total of 97.00 from holding Friedman Industries or generate 6.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Universal Stainless Alloy vs. Friedman Industries
Performance |
| Timeline |
| Universal Stainless Alloy |
| Friedman Industries |
Universal Stainless and Friedman Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Universal Stainless and Friedman Industries
The main advantage of trading using opposite Universal Stainless and Friedman Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Stainless 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.| Universal Stainless vs. Olympic Steel | Universal Stainless vs. Outokumpu Oyj ADR | Universal Stainless vs. Usinas Siderurgicas de | Universal Stainless vs. POSCO Holdings |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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