Correlation Between Ajusteel and Finebesteel

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

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

Diversification Opportunities for Ajusteel and Finebesteel

0.07

Correlation Coefficient

Ajusteel  Finebesteel

Significant diversification

The 3 months correlation between Ajusteel and Finebesteel is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Ajusteel Co and Finebesteel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Finebesteel and Ajusteel 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 Ajusteel Co are associated (or correlated) with Finebesteel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Finebesteel has no effect on the direction of Ajusteel i.e., Ajusteel and Finebesteel go up and down completely randomly.

Pair Corralation between Ajusteel and Finebesteel

Assuming the 90 days trading horizon Ajusteel Co is expected to under-perform the Finebesteel. But the stock apears to be less risky and, when comparing its historical volatility, Ajusteel Co is 1.55 times less risky than Finebesteel. The stock trades about -0.03 of its potential returns per unit of risk. The Finebesteel is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  104,700  in Finebesteel on November 29, 2024 and sell it today you would earn a total of  12,900  from holding Finebesteel or generate 12.32% return on investment over 90 days.

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

Ajusteel Co  vs.  Finebesteel

Ajusteel

Risk-Adjusted Performance

Very Weak

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

Finebesteel

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Finebesteel are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Finebesteel sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ajusteel and Finebesteel

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

The idea behind Ajusteel Co and Finebesteel 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.