Correlation Between CSP Steel and Muramoto Electron

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

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

Diversification Opportunities for CSP Steel and Muramoto Electron

0.68

Correlation Coefficient

CSP Steel  Muramoto Electron

Poor diversification

The 3 months correlation between CSP and Muramoto is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding CSP Steel Center and Muramoto Electron Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Muramoto Electron Public and CSP 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 CSP Steel Center are associated (or correlated) with Muramoto Electron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Muramoto Electron Public has no effect on the direction of CSP Steel i.e., CSP Steel and Muramoto Electron go up and down completely randomly.

Pair Corralation between CSP Steel and Muramoto Electron

Assuming the 90 days trading horizon CSP Steel Center is expected to generate 3.74 times more return on investment than Muramoto Electron. However, CSP Steel is 3.74 times more volatile than Muramoto Electron Public. It trades about 0.0 of its potential returns per unit of risk. Muramoto Electron Public is currently generating about -0.06 per unit of risk. If you would invest  63.00  in CSP Steel Center on September 13, 2024 and sell it today you would lose (5.00) from holding CSP Steel Center or give up 7.94% of portfolio value over 90 days.

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

CSP Steel Center  vs.  Muramoto Electron Public

CSP Steel Center

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CSP Steel Center has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, CSP Steel is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Muramoto Electron Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Muramoto Electron Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Muramoto Electron is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with CSP Steel and Muramoto Electron

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

The idea behind CSP Steel Center and Muramoto Electron Public 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.