Correlation Between Bellway PLC and United States

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

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

Diversification Opportunities for Bellway PLC and United States

0.28

Correlation Coefficient

Bellway PLC  United States

Modest diversification

The 3 months correlation between Bellway and United is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Bellway PLC and United States Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United States Steel and Bellway PLC 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 Bellway PLC are associated (or correlated) with United States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United States Steel has no effect on the direction of Bellway PLC i.e., Bellway PLC and United States go up and down completely randomly.

Pair Corralation between Bellway PLC and United States

Assuming the 90 days trading horizon Bellway PLC is expected to generate 0.38 times more return on investment than United States. However, Bellway PLC is 2.65 times less risky than United States. It trades about -0.25 of its potential returns per unit of risk. United States Steel is currently generating about -0.26 per unit of risk. If you would invest  254,400  in Bellway PLC on October 9, 2024 and sell it today you would lose (16,800) from holding Bellway PLC or give up 6.6% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	94.74%
Values	Daily Returns

Bellway PLC  vs.  United States Steel

Bellway PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bellway PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

United States Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days United States Steel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Bellway PLC and United States

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

The idea behind Bellway PLC and United States Steel 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.