Correlation Between Synalloy and Universal Stainless

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

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

Diversification Opportunities for Synalloy and Universal Stainless

0.43

Correlation Coefficient

Synalloy  Universal Stainless

Very weak diversification

The 3 months correlation between Synalloy and Universal is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Synalloy and Universal Stainless Alloy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Stainless Alloy and Synalloy 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 Synalloy are associated (or correlated) with Universal Stainless. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Stainless Alloy has no effect on the direction of Synalloy i.e., Synalloy and Universal Stainless go up and down completely randomly.

Pair Corralation between Synalloy and Universal Stainless

Given the investment horizon of 90 days Synalloy is expected to generate 3.78 times less return on investment than Universal Stainless. But when comparing it to its historical volatility, Synalloy is 1.37 times less risky than Universal Stainless. It trades about 0.05 of its potential returns per unit of risk. Universal Stainless Alloy is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,170  in Universal Stainless Alloy on October 5, 2024 and sell it today you would earn a total of  3,215  from holding Universal Stainless Alloy or generate 274.79% return on investment over 90 days.

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

Synalloy  vs.  Universal Stainless Alloy

Synalloy

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Synalloy are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Synalloy unveiled solid returns over the last few months and may actually be approaching a breakup point.

Universal Stainless Alloy

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Stainless Alloy are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, Universal Stainless reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Synalloy and Universal Stainless

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

The idea behind Synalloy and Universal Stainless Alloy 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.