Correlation Between City Steel and NAT ABSOLUTE

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

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

Diversification Opportunities for City Steel and NAT ABSOLUTE

0.52

Correlation Coefficient

City Steel  NAT ABSOLUTE

Very weak diversification

The 3 months correlation between City and NAT is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding City Steel Public and NAT ABSOLUTE TECHNOLOGIES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NAT ABSOLUTE TECHNOLOGIES and City 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 City Steel Public are associated (or correlated) with NAT ABSOLUTE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NAT ABSOLUTE TECHNOLOGIES has no effect on the direction of City Steel i.e., City Steel and NAT ABSOLUTE go up and down completely randomly.

Pair Corralation between City Steel and NAT ABSOLUTE

Assuming the 90 days trading horizon City Steel Public is expected to generate 0.74 times more return on investment than NAT ABSOLUTE. However, City Steel Public is 1.36 times less risky than NAT ABSOLUTE. It trades about -0.02 of its potential returns per unit of risk. NAT ABSOLUTE TECHNOLOGIES is currently generating about -0.21 per unit of risk. If you would invest  191.00  in City Steel Public on October 9, 2024 and sell it today you would lose (3.00) from holding City Steel Public or give up 1.57% of portfolio value over 90 days.

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

City Steel Public  vs.  NAT ABSOLUTE TECHNOLOGIES

City Steel Public

Risk-Adjusted Performance

0 of 100

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 quite persistent forward-looking signals, City Steel is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

NAT ABSOLUTE TECHNOLOGIES

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NAT ABSOLUTE TECHNOLOGIES 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 basic indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with City Steel and NAT ABSOLUTE

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

The idea behind City Steel Public and NAT ABSOLUTE TECHNOLOGIES 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.