Correlation Between United States and Impax Environmental

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

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

Diversification Opportunities for United States and Impax Environmental

-0.37

Correlation Coefficient

United States  Impax Environmental

Very good diversification

The 3 months correlation between United and Impax is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel and Impax Environmental Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Impax Environmental and United States 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 United States Steel are associated (or correlated) with Impax Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Impax Environmental has no effect on the direction of United States i.e., United States and Impax Environmental go up and down completely randomly.

Pair Corralation between United States and Impax Environmental

Assuming the 90 days trading horizon United States Steel is expected to generate 2.69 times more return on investment than Impax Environmental. However, United States is 2.69 times more volatile than Impax Environmental Markets. It trades about 0.2 of its potential returns per unit of risk. Impax Environmental Markets is currently generating about -0.11 per unit of risk. If you would invest  3,094  in United States Steel on December 31, 2024 and sell it today you would earn a total of  1,174  from holding United States Steel or generate 37.94% return on investment over 90 days.

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

United States Steel  vs.  Impax Environmental Markets

United States Steel

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in United States Steel are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, United States unveiled solid returns over the last few months and may actually be approaching a breakup point.

Impax Environmental

Risk-Adjusted Performance

Very Weak

Over the last 90 days Impax Environmental Markets has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with United States and Impax Environmental

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

The idea behind United States Steel and Impax Environmental Markets 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..