Correlation Between Settlebank and Finebesteel

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

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

Diversification Opportunities for Settlebank and Finebesteel

0.29

Correlation Coefficient

Settlebank  Finebesteel

Modest diversification

The 3 months correlation between Settlebank and Finebesteel is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Settlebank and Finebesteel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Finebesteel and Settlebank 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 Settlebank 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 Settlebank i.e., Settlebank and Finebesteel go up and down completely randomly.

Pair Corralation between Settlebank and Finebesteel

Assuming the 90 days trading horizon Settlebank is expected to generate 7.6 times less return on investment than Finebesteel. In addition to that, Settlebank is 1.04 times more volatile than Finebesteel. It trades about 0.01 of its total potential returns per unit of risk. Finebesteel is currently generating about 0.07 per unit of volatility. If you would invest  101,200  in Finebesteel on December 1, 2024 and sell it today you would earn a total of  10,100  from holding Finebesteel or generate 9.98% return on investment over 90 days.

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

Settlebank  vs.  Finebesteel

Settlebank

Risk-Adjusted Performance

Very Weak

Over the last 90 days Settlebank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Settlebank 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 5 (%) 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 Settlebank and Finebesteel

The main advantage of trading using opposite Settlebank and Finebesteel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Settlebank 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 Settlebank 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.