Correlation Between Moonbae Steel and INSUN Environmental

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

By analyzing existing cross correlation between Moonbae Steel and INSUN Environmental New, you can compare the effects of market volatilities on Moonbae Steel and INSUN Environmental 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 INSUN Environmental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Moonbae Steel and INSUN Environmental.

Diversification Opportunities for Moonbae Steel and INSUN Environmental

0.26

Correlation Coefficient

Moonbae Steel  INSUN Environmental

Modest diversification

The 3 months correlation between Moonbae and INSUN is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Moonbae Steel and INSUN Environmental New in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INSUN Environmental New 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 INSUN Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INSUN Environmental New has no effect on the direction of Moonbae Steel i.e., Moonbae Steel and INSUN Environmental go up and down completely randomly.

Pair Corralation between Moonbae Steel and INSUN Environmental

Assuming the 90 days trading horizon Moonbae Steel is expected to under-perform the INSUN Environmental. But the stock apears to be less risky and, when comparing its historical volatility, Moonbae Steel is 1.12 times less risky than INSUN Environmental. The stock trades about -0.09 of its potential returns per unit of risk. The INSUN Environmental New is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  498,000  in INSUN Environmental New on September 21, 2024 and sell it today you would earn a total of  47,000  from holding INSUN Environmental New or generate 9.44% return on investment over 90 days.

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

Moonbae Steel  vs.  INSUN Environmental New

Moonbae Steel

Risk-Adjusted Performance

1 of 100

Very 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.

INSUN Environmental New

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days INSUN Environmental New has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Moonbae Steel and INSUN Environmental

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

The idea behind Moonbae Steel and INSUN Environmental New 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.

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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.