Correlation Between Canadian Utilities and Daido Steel

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

By analyzing existing cross correlation between Canadian Utilities Limited and Daido Steel Co, you can compare the effects of market volatilities on Canadian Utilities and Daido Steel 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 Canadian Utilities with a short position of Daido Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian Utilities and Daido Steel.

Diversification Opportunities for Canadian Utilities and Daido Steel

0.11

Correlation Coefficient

Canadian Utilities  Daido Steel

Average diversification

The 3 months correlation between Canadian and Daido is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Utilities Limited and Daido Steel Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daido Steel and Canadian Utilities 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 Canadian Utilities Limited are associated (or correlated) with Daido Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daido Steel has no effect on the direction of Canadian Utilities i.e., Canadian Utilities and Daido Steel go up and down completely randomly.

Pair Corralation between Canadian Utilities and Daido Steel

Assuming the 90 days horizon Canadian Utilities Limited is expected to generate 0.6 times more return on investment than Daido Steel. However, Canadian Utilities Limited is 1.67 times less risky than Daido Steel. It trades about -0.04 of its potential returns per unit of risk. Daido Steel Co is currently generating about -0.09 per unit of risk. If you would invest  2,359  in Canadian Utilities Limited on October 22, 2024 and sell it today you would lose (63.00) from holding Canadian Utilities Limited or give up 2.67% of portfolio value over 90 days.

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

Canadian Utilities Limited  vs.  Daido Steel Co

Canadian Utilities

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Canadian Utilities Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Canadian Utilities is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Daido Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Daido Steel Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Canadian Utilities and Daido Steel

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

The idea behind Canadian Utilities Limited and Daido Steel Co 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.