Correlation Between CU Tech and Moonbae Steel

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

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

Diversification Opportunities for CU Tech and Moonbae Steel

0.21

Correlation Coefficient

CU Tech  Moonbae Steel

Modest diversification

The 3 months correlation between 376290 and Moonbae is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding CU Tech Corp and Moonbae Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Moonbae Steel and CU Tech 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 CU Tech Corp are associated (or correlated) with Moonbae Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Moonbae Steel has no effect on the direction of CU Tech i.e., CU Tech and Moonbae Steel go up and down completely randomly.

Pair Corralation between CU Tech and Moonbae Steel

Assuming the 90 days trading horizon CU Tech Corp is expected to under-perform the Moonbae Steel. In addition to that, CU Tech is 1.06 times more volatile than Moonbae Steel. It trades about -0.02 of its total potential returns per unit of risk. Moonbae Steel is currently generating about -0.02 per unit of volatility. If you would invest  316,823  in Moonbae Steel on September 19, 2024 and sell it today you would lose (82,823) from holding Moonbae Steel or give up 26.14% of portfolio value over 90 days.

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

CU Tech Corp  vs.  Moonbae Steel

CU Tech Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Moonbae Steel

Risk-Adjusted Performance

1 of 100

Weak

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

Pair Trading with CU Tech and Moonbae Steel

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

The idea behind CU Tech Corp and Moonbae Steel 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.