Correlation Between United States and Ferrum SA
Can any of the company-specific risk be diversified away by investing in both United States and Ferrum SA 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 Ferrum SA 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 Ferrum SA, you can compare the effects of market volatilities on United States and Ferrum SA 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 Ferrum SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of United States and Ferrum SA.
Diversification Opportunities for United States and Ferrum SA
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between United and Ferrum is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel and Ferrum SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ferrum SA 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 Ferrum SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ferrum SA has no effect on the direction of United States i.e., United States and Ferrum SA go up and down completely randomly.
Pair Corralation between United States and Ferrum SA
Given the investment horizon of 90 days United States Steel is expected to generate 1.25 times more return on investment than Ferrum SA. However, United States is 1.25 times more volatile than Ferrum SA. It trades about 0.31 of its potential returns per unit of risk. Ferrum SA is currently generating about 0.09 per unit of risk. If you would invest 1,220,000 in United States Steel on October 24, 2024 and sell it today you would earn a total of 230,000 from holding United States Steel or generate 18.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
United States Steel vs. Ferrum SA
Performance |
| Timeline |
| United States Steel |
| Ferrum SA |
United States and Ferrum SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United States and Ferrum SA
The main advantage of trading using opposite United States and Ferrum SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United States position performs unexpectedly, Ferrum SA 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 Ferrum SA will offset losses from the drop in Ferrum SA's long position.| United States vs. Agrometal SAI | United States vs. Compania de Transporte | United States vs. Harmony Gold Mining | United States vs. Transportadora de Gas |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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