Correlation Between Constellium and Mesabi Trust

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

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

Diversification Opportunities for Constellium and Mesabi Trust

-0.74

Correlation Coefficient

Constellium  Mesabi Trust

Pay attention - limited upside

The 3 months correlation between Constellium and Mesabi is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Constellium Nv and Mesabi Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mesabi Trust and Constellium 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 Constellium Nv are associated (or correlated) with Mesabi Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mesabi Trust has no effect on the direction of Constellium i.e., Constellium and Mesabi Trust go up and down completely randomly.

Pair Corralation between Constellium and Mesabi Trust

Given the investment horizon of 90 days Constellium Nv is expected to under-perform the Mesabi Trust. In addition to that, Constellium is 1.2 times more volatile than Mesabi Trust. It trades about -0.08 of its total potential returns per unit of risk. Mesabi Trust is currently generating about 0.22 per unit of volatility. If you would invest  1,707  in Mesabi Trust on September 5, 2024 and sell it today you would earn a total of  1,009  from holding Mesabi Trust or generate 59.11% return on investment over 90 days.

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

Constellium Nv  vs.  Mesabi Trust

Constellium Nv

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Constellium Nv has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Mesabi Trust

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Mesabi Trust are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Mesabi Trust sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Constellium and Mesabi Trust

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

The idea behind Constellium Nv and Mesabi Trust 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.