Correlation Between AAPICO Hitech and City Steel

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

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

Diversification Opportunities for AAPICO Hitech and City Steel

0.79

Correlation Coefficient

AAPICO Hitech  City Steel

Poor diversification

The 3 months correlation between AAPICO and City is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding AAPICO Hitech Public and City Steel Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on City Steel Public and AAPICO Hitech 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 AAPICO Hitech Public are associated (or correlated) with City Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of City Steel Public has no effect on the direction of AAPICO Hitech i.e., AAPICO Hitech and City Steel go up and down completely randomly.

Pair Corralation between AAPICO Hitech and City Steel

Assuming the 90 days horizon AAPICO Hitech Public is expected to under-perform the City Steel. But the stock apears to be less risky and, when comparing its historical volatility, AAPICO Hitech Public is 1.43 times less risky than City Steel. The stock trades about -0.17 of its potential returns per unit of risk. The City Steel Public is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  188.00  in City Steel Public on December 29, 2024 and sell it today you would lose (25.00) from holding City Steel Public or give up 13.3% of portfolio value over 90 days.

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

AAPICO Hitech Public  vs.  City Steel Public

AAPICO Hitech Public

Risk-Adjusted Performance

Very Weak

Over the last 90 days AAPICO Hitech Public 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 fundamental drivers 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.

City Steel Public

Risk-Adjusted Performance

Very Weak

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

Pair Trading with AAPICO Hitech and City Steel

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

The idea behind AAPICO Hitech Public and City Steel Public 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.