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 Co, 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

0.36

Correlation Coefficient

Histeel  BooKook Steel

Weak diversification

The 3 months correlation between Histeel and BooKook is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Histeel and BooKook Steel Co 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 5.19 times less return on investment than BooKook Steel. In addition to that, Histeel is 1.28 times more volatile than BooKook Steel Co. It trades about 0.01 of its total potential returns per unit of risk. BooKook Steel Co is currently generating about 0.08 per unit of volatility. If you would invest  230,860  in BooKook Steel Co on November 29, 2024 and sell it today you would earn a total of  22,140  from holding BooKook Steel Co or generate 9.59% return on investment over 90 days.

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

Histeel  vs.  BooKook Steel Co

Histeel

Risk-Adjusted Performance

Very Weak

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

BooKook Steel

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BooKook Steel Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, BooKook Steel may actually be approaching a critical reversion point that can send shares even higher in March 2025.

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 Co 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.