Correlation Between Commercial Metals and Synalloy

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

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

Diversification Opportunities for Commercial Metals and Synalloy

0.37

Correlation Coefficient

Commercial Metals  Synalloy

Weak diversification

The 3 months correlation between Commercial and Synalloy is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Commercial Metals and Synalloy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Synalloy and Commercial Metals 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 Commercial Metals are associated (or correlated) with Synalloy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Synalloy has no effect on the direction of Commercial Metals i.e., Commercial Metals and Synalloy go up and down completely randomly.

Pair Corralation between Commercial Metals and Synalloy

Considering the 90-day investment horizon Commercial Metals is expected to under-perform the Synalloy. But the stock apears to be less risky and, when comparing its historical volatility, Commercial Metals is 1.12 times less risky than Synalloy. The stock trades about -0.44 of its potential returns per unit of risk. The Synalloy is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,088  in Synalloy on September 28, 2024 and sell it today you would earn a total of  40.00  from holding Synalloy or generate 3.68% return on investment over 90 days.

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

Commercial Metals  vs.  Synalloy

Commercial Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Commercial Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's primary indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Synalloy

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Synalloy are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Synalloy unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Commercial Metals and Synalloy

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

The idea behind Commercial Metals and Synalloy 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.