Correlation Between United States and NEW MILLENNIUM
Can any of the company-specific risk be diversified away by investing in both United States and NEW MILLENNIUM 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 United States and NEW MILLENNIUM into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United States Steel and NEW MILLENNIUM IRON, you can compare the effects of market volatilities on United States and NEW MILLENNIUM 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 United States with a short position of NEW MILLENNIUM. Check out your portfolio center. Please also check ongoing floating volatility patterns of United States and NEW MILLENNIUM.
Diversification Opportunities for United States and NEW MILLENNIUM
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between United and NEW is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel and NEW MILLENNIUM IRON in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NEW MILLENNIUM IRON and United States 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 United States Steel are associated (or correlated) with NEW MILLENNIUM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NEW MILLENNIUM IRON has no effect on the direction of United States i.e., United States and NEW MILLENNIUM go up and down completely randomly.
Pair Corralation between United States and NEW MILLENNIUM
Assuming the 90 days trading horizon United States Steel is expected to generate 1.92 times more return on investment than NEW MILLENNIUM. However, United States is 1.92 times more volatile than NEW MILLENNIUM IRON. It trades about 0.14 of its potential returns per unit of risk. NEW MILLENNIUM IRON is currently generating about -0.34 per unit of risk. If you would invest 3,267 in United States Steel on November 1, 2024 and sell it today you would earn a total of 274.00 from holding United States Steel or generate 8.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
United States Steel vs. NEW MILLENNIUM IRON
Performance |
| Timeline |
| United States Steel |
| NEW MILLENNIUM IRON |
United States and NEW MILLENNIUM Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United States and NEW MILLENNIUM
The main advantage of trading using opposite United States and NEW MILLENNIUM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United States position performs unexpectedly, NEW MILLENNIUM 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 NEW MILLENNIUM will offset losses from the drop in NEW MILLENNIUM's long position.| United States vs. Shenandoah Telecommunications | United States vs. ANGANG STEEL H | United States vs. Mitsui Chemicals | United States vs. HUTCHISON TELECOMM |
| NEW MILLENNIUM vs. NAKED WINES PLC | NEW MILLENNIUM vs. PennantPark Investment | NEW MILLENNIUM vs. United Utilities Group | NEW MILLENNIUM vs. Japan Asia 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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