Correlation Between Archean Chemical and Steelcast

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

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

Diversification Opportunities for Archean Chemical and Steelcast

0.2

Correlation Coefficient

Archean Chemical  Steelcast

Modest diversification

The 3 months correlation between Archean and Steelcast is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Archean Chemical Industries and Steelcast Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steelcast Limited and Archean Chemical 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 Archean Chemical Industries are associated (or correlated) with Steelcast. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Steelcast Limited has no effect on the direction of Archean Chemical i.e., Archean Chemical and Steelcast go up and down completely randomly.

Pair Corralation between Archean Chemical and Steelcast

Assuming the 90 days trading horizon Archean Chemical Industries is expected to under-perform the Steelcast. But the stock apears to be less risky and, when comparing its historical volatility, Archean Chemical Industries is 1.72 times less risky than Steelcast. The stock trades about -0.14 of its potential returns per unit of risk. The Steelcast Limited is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  79,960  in Steelcast Limited on September 28, 2024 and sell it today you would earn a total of  4,500  from holding Steelcast Limited or generate 5.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Archean Chemical Industries  vs.  Steelcast Limited

Archean Chemical Ind

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Archean Chemical Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Steelcast Limited

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Steelcast Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting fundamental indicators, Steelcast may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Archean Chemical and Steelcast

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

The idea behind Archean Chemical Industries and Steelcast Limited 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.