Correlation Between J Steel and Husteel

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

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

Diversification Opportunities for J Steel and Husteel

-0.43

Correlation Coefficient

J Steel  Husteel

Very good diversification

The 3 months correlation between 023440 and Husteel is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding J Steel Co and Husteel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Husteel and J 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 J Steel Co are associated (or correlated) with Husteel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Husteel has no effect on the direction of J Steel i.e., J Steel and Husteel go up and down completely randomly.

Pair Corralation between J Steel and Husteel

Assuming the 90 days trading horizon J Steel is expected to generate 2.21 times less return on investment than Husteel. In addition to that, J Steel is 1.1 times more volatile than Husteel. It trades about 0.09 of its total potential returns per unit of risk. Husteel is currently generating about 0.21 per unit of volatility. If you would invest  386,000  in Husteel on December 2, 2024 and sell it today you would earn a total of  103,500  from holding Husteel or generate 26.81% return on investment over 90 days.

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

J Steel Co  vs.  Husteel

J Steel

Risk-Adjusted Performance

Very Weak

Over the last 90 days J Steel Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, J Steel is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Husteel

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Husteel are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Husteel sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with J Steel and Husteel

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

The idea behind J Steel Co and Husteel 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.