Correlation Between Nature and Moonbae Steel

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

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

Diversification Opportunities for Nature and Moonbae Steel

0.11

Correlation Coefficient

Nature  Moonbae Steel

Average diversification

The 3 months correlation between Nature and Moonbae is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Nature and Environment and Moonbae Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Moonbae Steel and Nature 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 Nature and Environment are associated (or correlated) with Moonbae Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Moonbae Steel has no effect on the direction of Nature i.e., Nature and Moonbae Steel go up and down completely randomly.

Pair Corralation between Nature and Moonbae Steel

Assuming the 90 days trading horizon Nature is expected to generate 3.99 times less return on investment than Moonbae Steel. But when comparing it to its historical volatility, Nature and Environment is 1.42 times less risky than Moonbae Steel. It trades about 0.06 of its potential returns per unit of risk. Moonbae Steel is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  218,235  in Moonbae Steel on December 10, 2024 and sell it today you would earn a total of  53,765  from holding Moonbae Steel or generate 24.64% return on investment over 90 days.

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

Nature and Environment  vs.  Moonbae Steel

Nature and Environment

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nature and Environment are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Nature may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Moonbae Steel

Risk-Adjusted Performance

Good

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

Pair Trading with Nature and Moonbae Steel

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

The idea behind Nature and Environment and Moonbae 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.