Correlation Between ESAB Corp and Ryerson Holding

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

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

Diversification Opportunities for ESAB Corp and Ryerson Holding

0.94

Correlation Coefficient

ESAB Corp  Ryerson Holding

Almost no diversification

The 3 months correlation between ESAB and Ryerson is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding ESAB Corp and Ryerson Holding Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ryerson Holding Corp and ESAB Corp 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 ESAB Corp are associated (or correlated) with Ryerson Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ryerson Holding Corp has no effect on the direction of ESAB Corp i.e., ESAB Corp and Ryerson Holding go up and down completely randomly.

Pair Corralation between ESAB Corp and Ryerson Holding

Given the investment horizon of 90 days ESAB Corp is expected to generate 1.29 times less return on investment than Ryerson Holding. But when comparing it to its historical volatility, ESAB Corp is 1.31 times less risky than Ryerson Holding. It trades about 0.14 of its potential returns per unit of risk. Ryerson Holding Corp is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,982  in Ryerson Holding Corp on August 30, 2024 and sell it today you would earn a total of  568.00  from holding Ryerson Holding Corp or generate 28.66% return on investment over 90 days.

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

ESAB Corp  vs.  Ryerson Holding Corp

ESAB Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ESAB Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, ESAB Corp sustained solid returns over the last few months and may actually be approaching a breakup point.

Ryerson Holding Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ryerson Holding Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Ryerson Holding demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ESAB Corp and Ryerson Holding

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

The idea behind ESAB Corp and Ryerson Holding Corp 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.