Correlation Between Leader Steel and CB Industrial

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

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

Diversification Opportunities for Leader Steel and CB Industrial

0.34

Correlation Coefficient

Leader Steel  CB Industrial

Weak diversification

The 3 months correlation between Leader and 7076 is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Leader Steel Holdings and CB Industrial Product in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CB Industrial Product and Leader Steel 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 Leader Steel Holdings are associated (or correlated) with CB Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CB Industrial Product has no effect on the direction of Leader Steel i.e., Leader Steel and CB Industrial go up and down completely randomly.

Pair Corralation between Leader Steel and CB Industrial

Assuming the 90 days trading horizon Leader Steel Holdings is expected to under-perform the CB Industrial. In addition to that, Leader Steel is 3.42 times more volatile than CB Industrial Product. It trades about -0.08 of its total potential returns per unit of risk. CB Industrial Product is currently generating about -0.07 per unit of volatility. If you would invest  112.00  in CB Industrial Product on December 2, 2024 and sell it today you would lose (2.00) from holding CB Industrial Product or give up 1.79% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Leader Steel Holdings  vs.  CB Industrial Product

Leader Steel Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Leader Steel Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

CB Industrial Product

Risk-Adjusted Performance

Very Weak

Over the last 90 days CB Industrial Product has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Leader Steel and CB Industrial

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

The idea behind Leader Steel Holdings and CB Industrial Product 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.