Correlation Between Moonbae Steel and Total Soft

Can any of the company-specific risk be diversified away by investing in both Moonbae Steel and Total Soft 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 Moonbae Steel and Total Soft into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Moonbae Steel and Total Soft Bank, you can compare the effects of market volatilities on Moonbae Steel and Total Soft 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 Moonbae Steel with a short position of Total Soft. Check out your portfolio center. Please also check ongoing floating volatility patterns of Moonbae Steel and Total Soft.

Diversification Opportunities for Moonbae Steel and Total Soft

-0.45

Correlation Coefficient

Moonbae Steel  Total Soft

Very good diversification

The 3 months correlation between Moonbae and Total is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Moonbae Steel and Total Soft Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Total Soft Bank and Moonbae Steel 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 Moonbae Steel are associated (or correlated) with Total Soft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Total Soft Bank has no effect on the direction of Moonbae Steel i.e., Moonbae Steel and Total Soft go up and down completely randomly.

Pair Corralation between Moonbae Steel and Total Soft

Assuming the 90 days trading horizon Moonbae Steel is expected to under-perform the Total Soft. But the stock apears to be less risky and, when comparing its historical volatility, Moonbae Steel is 4.13 times less risky than Total Soft. The stock trades about -0.08 of its potential returns per unit of risk. The Total Soft Bank is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  436,000  in Total Soft Bank on September 22, 2024 and sell it today you would earn a total of  446,000  from holding Total Soft Bank or generate 102.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Moonbae Steel  vs.  Total Soft Bank

Moonbae Steel

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Moonbae Steel are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Moonbae Steel is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Total Soft Bank

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Total Soft Bank are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Total Soft sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Moonbae Steel and Total Soft

The main advantage of trading using opposite Moonbae Steel and Total Soft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Moonbae Steel position performs unexpectedly, Total Soft 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 Total Soft will offset losses from the drop in Total Soft's long position.

The idea behind Moonbae Steel and Total Soft Bank pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.