Correlation Between Baker Steel and Hardide PLC

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

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

Diversification Opportunities for Baker Steel and Hardide PLC

-0.18

Correlation Coefficient

Baker Steel  Hardide PLC

Good diversification

The 3 months correlation between Baker and Hardide is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Baker Steel Resources and Hardide PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hardide PLC and Baker 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 Baker Steel Resources are associated (or correlated) with Hardide PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hardide PLC has no effect on the direction of Baker Steel i.e., Baker Steel and Hardide PLC go up and down completely randomly.

Pair Corralation between Baker Steel and Hardide PLC

Assuming the 90 days trading horizon Baker Steel Resources is expected to under-perform the Hardide PLC. But the stock apears to be less risky and, when comparing its historical volatility, Baker Steel Resources is 3.73 times less risky than Hardide PLC. The stock trades about -0.09 of its potential returns per unit of risk. The Hardide PLC is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  475.00  in Hardide PLC on October 10, 2024 and sell it today you would earn a total of  88.00  from holding Hardide PLC or generate 18.53% return on investment over 90 days.

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

Baker Steel Resources  vs.  Hardide PLC

Baker Steel Resources

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Baker Steel Resources are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Baker Steel unveiled solid returns over the last few months and may actually be approaching a breakup point.

Hardide PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hardide PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Hardide PLC is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Baker Steel and Hardide PLC

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

The idea behind Baker Steel Resources and Hardide PLC 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..