Correlation Between United States and West Red
Can any of the company-specific risk be diversified away by investing in both United States and West Red 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 West Red 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 West Red Lake, you can compare the effects of market volatilities on United States and West Red 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 West Red. Check out your portfolio center. Please also check ongoing floating volatility patterns of United States and West Red.
Diversification Opportunities for United States and West Red
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between United and West is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel and West Red Lake in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on West Red Lake 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 West Red. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of West Red Lake has no effect on the direction of United States i.e., United States and West Red go up and down completely randomly.
Pair Corralation between United States and West Red
Taking into account the 90-day investment horizon United States Steel is expected to generate 1.18 times more return on investment than West Red. However, United States is 1.18 times more volatile than West Red Lake. It trades about 0.2 of its potential returns per unit of risk. West Red Lake is currently generating about 0.09 per unit of risk. If you would invest 3,197 in United States Steel on October 25, 2024 and sell it today you would earn a total of 450.00 from holding United States Steel or generate 14.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 94.74% |
| Values | Daily Returns |
United States Steel vs. West Red Lake
Performance |
| Timeline |
| United States Steel |
| West Red Lake |
United States and West Red Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United States and West Red
The main advantage of trading using opposite United States and West Red positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United States position performs unexpectedly, West Red 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 West Red will offset losses from the drop in West Red'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 |
| West Red vs. TFI International | West Red vs. MYT Netherlands Parent | West Red vs. LB Foster | West Red vs. Albertsons Companies |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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