Correlation Between United States and IT Tech
Can any of the company-specific risk be diversified away by investing in both United States and IT Tech 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 IT Tech 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 IT Tech Packaging, you can compare the effects of market volatilities on United States and IT Tech 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 IT Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of United States and IT Tech.
Diversification Opportunities for United States and IT Tech
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between United and ITP is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel and IT Tech Packaging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IT Tech Packaging 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 IT Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IT Tech Packaging has no effect on the direction of United States i.e., United States and IT Tech go up and down completely randomly.
Pair Corralation between United States and IT Tech
Taking into account the 90-day investment horizon United States is expected to generate 7.59 times less return on investment than IT Tech. But when comparing it to its historical volatility, United States Steel is 6.71 times less risky than IT Tech. It trades about 0.21 of its potential returns per unit of risk. IT Tech Packaging is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 21.00 in IT Tech Packaging on October 23, 2024 and sell it today you would earn a total of 22.00 from holding IT Tech Packaging or generate 104.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
United States Steel vs. IT Tech Packaging
Performance |
| Timeline |
| United States Steel |
| IT Tech Packaging |
United States and IT Tech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United States and IT Tech
The main advantage of trading using opposite United States and IT Tech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United States position performs unexpectedly, IT Tech 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 IT Tech will offset losses from the drop in IT Tech's long position.| United States vs. Nucor Corp | United States vs. Steel Dynamics | United States vs. ArcelorMittal SA ADR | United States vs. Gerdau SA ADR |
| IT Tech vs. Mondi PLC ADR | IT Tech vs. Holmen AB ADR | IT Tech vs. Canfor Pulp Products | IT Tech vs. Nine Dragons Paper |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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