Correlation Between Automobile and Ni Steel

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

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

Diversification Opportunities for Automobile and Ni Steel

0.35

Correlation Coefficient

Automobile  Ni Steel

Weak diversification

The 3 months correlation between Automobile and 008260 is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Automobile Pc and Ni Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ni Steel and Automobile 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 Automobile Pc are associated (or correlated) with Ni Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ni Steel has no effect on the direction of Automobile i.e., Automobile and Ni Steel go up and down completely randomly.

Pair Corralation between Automobile and Ni Steel

Assuming the 90 days trading horizon Automobile Pc is expected to generate 1.38 times more return on investment than Ni Steel. However, Automobile is 1.38 times more volatile than Ni Steel. It trades about -0.04 of its potential returns per unit of risk. Ni Steel is currently generating about -0.09 per unit of risk. If you would invest  68,100  in Automobile Pc on September 12, 2024 and sell it today you would lose (6,500) from holding Automobile Pc or give up 9.54% of portfolio value over 90 days.

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

Automobile Pc  vs.  Ni Steel

Automobile Pc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Automobile Pc 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.

Ni Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ni Steel has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Automobile and Ni Steel

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

The idea behind Automobile Pc and Ni Steel 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.