Correlation Between Finebesteel and Daiyang Metal

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

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

Diversification Opportunities for Finebesteel and Daiyang Metal

-0.55

Correlation Coefficient

Finebesteel  Daiyang Metal

Excellent diversification

The 3 months correlation between Finebesteel and Daiyang is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Finebesteel and Daiyang Metal Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daiyang Metal and Finebesteel 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 Finebesteel are associated (or correlated) with Daiyang Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daiyang Metal has no effect on the direction of Finebesteel i.e., Finebesteel and Daiyang Metal go up and down completely randomly.

Pair Corralation between Finebesteel and Daiyang Metal

Assuming the 90 days trading horizon Finebesteel is expected to under-perform the Daiyang Metal. But the stock apears to be less risky and, when comparing its historical volatility, Finebesteel is 1.58 times less risky than Daiyang Metal. The stock trades about -0.23 of its potential returns per unit of risk. The Daiyang Metal Co is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  155,000  in Daiyang Metal Co on October 8, 2024 and sell it today you would lose (1,600) from holding Daiyang Metal Co or give up 1.03% of portfolio value over 90 days.

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

Finebesteel  vs.  Daiyang Metal Co

Finebesteel

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Finebesteel are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Finebesteel is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Daiyang Metal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Daiyang Metal Co 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.

Pair Trading with Finebesteel and Daiyang Metal

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

The idea behind Finebesteel and Daiyang Metal 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.