Correlation Between KRAKATAU STEEL and Caltagirone SpA

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

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

Diversification Opportunities for KRAKATAU STEEL and Caltagirone SpA

0.32

Correlation Coefficient

KRAKATAU STEEL  Caltagirone SpA

Weak diversification

The 3 months correlation between KRAKATAU and Caltagirone is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding KRAKATAU STEEL B and Caltagirone SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caltagirone SpA and KRAKATAU 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 KRAKATAU STEEL B are associated (or correlated) with Caltagirone SpA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caltagirone SpA has no effect on the direction of KRAKATAU STEEL i.e., KRAKATAU STEEL and Caltagirone SpA go up and down completely randomly.

Pair Corralation between KRAKATAU STEEL and Caltagirone SpA

Assuming the 90 days trading horizon KRAKATAU STEEL is expected to generate 1.12 times less return on investment than Caltagirone SpA. In addition to that, KRAKATAU STEEL is 3.26 times more volatile than Caltagirone SpA. It trades about 0.02 of its total potential returns per unit of risk. Caltagirone SpA is currently generating about 0.08 per unit of volatility. If you would invest  273.00  in Caltagirone SpA on September 20, 2024 and sell it today you would earn a total of  321.00  from holding Caltagirone SpA or generate 117.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

KRAKATAU STEEL B   vs.  Caltagirone SpA

KRAKATAU STEEL B

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in KRAKATAU STEEL B are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward-looking signals, KRAKATAU STEEL unveiled solid returns over the last few months and may actually be approaching a breakup point.

Caltagirone SpA

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Caltagirone SpA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Caltagirone SpA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with KRAKATAU STEEL and Caltagirone SpA

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

The idea behind KRAKATAU STEEL B and Caltagirone SpA 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.