Correlation Between BooKook Steel and Settlebank

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

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

Diversification Opportunities for BooKook Steel and Settlebank

0.88

Correlation Coefficient

BooKook Steel  Settlebank

Very poor diversification

The 3 months correlation between BooKook and Settlebank is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding BooKook Steel Co and Settlebank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Settlebank and BooKook 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 BooKook Steel Co are associated (or correlated) with Settlebank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Settlebank has no effect on the direction of BooKook Steel i.e., BooKook Steel and Settlebank go up and down completely randomly.

Pair Corralation between BooKook Steel and Settlebank

Assuming the 90 days trading horizon BooKook Steel Co is expected to generate 0.73 times more return on investment than Settlebank. However, BooKook Steel Co is 1.37 times less risky than Settlebank. It trades about 0.08 of its potential returns per unit of risk. Settlebank is currently generating about -0.07 per unit of risk. If you would invest  242,000  in BooKook Steel Co on September 27, 2024 and sell it today you would earn a total of  10,000  from holding BooKook Steel Co or generate 4.13% return on investment over 90 days.

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

BooKook Steel Co  vs.  Settlebank

BooKook Steel

Risk-Adjusted Performance

0 of 100

Very Weak

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

Settlebank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Settlebank 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 BooKook Steel and Settlebank

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

The idea behind BooKook Steel Co and Settlebank 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.