Correlation Between Caledonia Investments and United States

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

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

Diversification Opportunities for Caledonia Investments and United States

-0.82

Correlation Coefficient

Caledonia Investments  United States

Pay attention - limited upside

The 3 months correlation between Caledonia and United is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Caledonia Investments 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 Caledonia Investments 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 Caledonia Investments 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 Caledonia Investments i.e., Caledonia Investments and United States go up and down completely randomly.

Pair Corralation between Caledonia Investments and United States

Assuming the 90 days trading horizon Caledonia Investments is expected to generate 0.22 times more return on investment than United States. However, Caledonia Investments is 4.56 times less risky than United States. It trades about 0.15 of its potential returns per unit of risk. United States Steel is currently generating about -0.15 per unit of risk. If you would invest  338,480  in Caledonia Investments on October 9, 2024 and sell it today you would earn a total of  17,020  from holding Caledonia Investments or generate 5.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	97.56%
Values	Daily Returns

Caledonia Investments  vs.  United States Steel

Caledonia Investments

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Caledonia Investments are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Caledonia Investments is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

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 Caledonia Investments and United States

The main advantage of trading using opposite Caledonia Investments and United States positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caledonia Investments 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 Caledonia Investments 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.