Correlation Between Histeel and Bookook Steel

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

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

Diversification Opportunities for Histeel and Bookook Steel

0.86

Correlation Coefficient

Histeel  Bookook Steel

Very poor diversification

The 3 months correlation between Histeel and Bookook is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Histeel and Bookook Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bookook Steel and Histeel 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 Histeel are associated (or correlated) with Bookook Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bookook Steel has no effect on the direction of Histeel i.e., Histeel and Bookook Steel go up and down completely randomly.

Pair Corralation between Histeel and Bookook Steel

Assuming the 90 days trading horizon Histeel is expected to generate 2.08 times more return on investment than Bookook Steel. However, Histeel is 2.08 times more volatile than Bookook Steel. It trades about 0.0 of its potential returns per unit of risk. Bookook Steel is currently generating about -0.13 per unit of risk. If you would invest  329,500  in Histeel on September 25, 2024 and sell it today you would lose (45,000) from holding Histeel or give up 13.66% of portfolio value over 90 days.

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

Histeel  vs.  Bookook Steel

Histeel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Histeel 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.

Bookook Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bookook Steel 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.

Pair Trading with Histeel and Bookook Steel

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

The idea behind Histeel and Bookook 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.