Correlation Between Ferrexpo PLC and Stelco Holdings

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

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

Diversification Opportunities for Ferrexpo PLC and Stelco Holdings

0.57

Correlation Coefficient

Ferrexpo PLC  Stelco Holdings

Very weak diversification

The 3 months correlation between Ferrexpo and Stelco is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Ferrexpo PLC and Stelco Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stelco Holdings and Ferrexpo PLC 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 Ferrexpo PLC are associated (or correlated) with Stelco Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stelco Holdings has no effect on the direction of Ferrexpo PLC i.e., Ferrexpo PLC and Stelco Holdings go up and down completely randomly.

Pair Corralation between Ferrexpo PLC and Stelco Holdings

Assuming the 90 days horizon Ferrexpo PLC is expected to generate 4.8 times less return on investment than Stelco Holdings. In addition to that, Ferrexpo PLC is 1.18 times more volatile than Stelco Holdings. It trades about 0.01 of its total potential returns per unit of risk. Stelco Holdings is currently generating about 0.04 per unit of volatility. If you would invest  2,977  in Stelco Holdings on September 28, 2024 and sell it today you would earn a total of  1,964  from holding Stelco Holdings or generate 65.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	90.56%
Values	Daily Returns

Ferrexpo PLC  vs.  Stelco Holdings

Ferrexpo PLC

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ferrexpo PLC are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Ferrexpo PLC reported solid returns over the last few months and may actually be approaching a breakup point.

Stelco Holdings

Risk-Adjusted Performance

0 of 100

Weak

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

Pair Trading with Ferrexpo PLC and Stelco Holdings

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

The idea behind Ferrexpo PLC and Stelco Holdings 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.