Correlation Between Computer Age and SAL Steel

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

By analyzing existing cross correlation between Computer Age Management and SAL Steel Limited, you can compare the effects of market volatilities on Computer Age and SAL 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 Computer Age with a short position of SAL Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Computer Age and SAL Steel.

Diversification Opportunities for Computer Age and SAL Steel

-0.43

Correlation Coefficient

Computer Age  SAL Steel

Very good diversification

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

Pair Corralation between Computer Age and SAL Steel

Assuming the 90 days trading horizon Computer Age Management is expected to generate 0.83 times more return on investment than SAL Steel. However, Computer Age Management is 1.2 times less risky than SAL Steel. It trades about 0.11 of its potential returns per unit of risk. SAL Steel Limited is currently generating about -0.11 per unit of risk. If you would invest  440,865  in Computer Age Management on October 3, 2024 and sell it today you would earn a total of  66,675  from holding Computer Age Management or generate 15.12% return on investment over 90 days.

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

Computer Age Management  vs.  SAL Steel Limited

Computer Age Management

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Computer Age Management are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Computer Age unveiled solid returns over the last few months and may actually be approaching a breakup point.

SAL Steel Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SAL Steel Limited 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.

Pair Trading with Computer Age and SAL Steel

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

The idea behind Computer Age Management and SAL Steel 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.