Correlation Between Constellium and Universal Stainless

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

By analyzing existing cross correlation between Constellium Nv and Universal Stainless Alloy, you can compare the effects of market volatilities on Constellium and Universal Stainless 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 Universal Stainless. Check out your portfolio center. Please also check ongoing floating volatility patterns of Constellium and Universal Stainless.

Diversification Opportunities for Constellium and Universal Stainless

-0.75

Correlation Coefficient

Constellium  Universal Stainless

Pay attention - limited upside

The 3 months correlation between Constellium and Universal is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Constellium Nv and Universal Stainless Alloy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Stainless Alloy 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 Universal Stainless. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Stainless Alloy has no effect on the direction of Constellium i.e., Constellium and Universal Stainless go up and down completely randomly.

Pair Corralation between Constellium and Universal Stainless

Given the investment horizon of 90 days Constellium Nv is expected to under-perform the Universal Stainless. In addition to that, Constellium is 6.88 times more volatile than Universal Stainless Alloy. It trades about -0.33 of its total potential returns per unit of risk. Universal Stainless Alloy is currently generating about -0.14 per unit of volatility. If you would invest  4,422  in Universal Stainless Alloy on October 9, 2024 and sell it today you would lose (33.00) from holding Universal Stainless Alloy or give up 0.75% of portfolio value over 90 days.

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

Constellium Nv  vs.  Universal Stainless Alloy

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 February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Universal Stainless Alloy

Risk-Adjusted Performance

12 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Stainless Alloy are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, Universal Stainless may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Constellium and Universal Stainless

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

The idea behind Constellium Nv and Universal Stainless Alloy 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.