Correlation Between Cia De and United States

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

By analyzing existing cross correlation between Cia de Ferro and United States Steel, you can compare the effects of market volatilities on Cia De and United States 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 Cia De with a short position of United States. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cia De and United States.

Diversification Opportunities for Cia De and United States

-0.26

Correlation Coefficient

Cia De  United States

Very good diversification

The 3 months correlation between Cia and United is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Cia de Ferro and United States Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United States Steel and Cia De 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 Cia de Ferro are associated (or correlated) with United States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United States Steel has no effect on the direction of Cia De i.e., Cia De and United States go up and down completely randomly.

Pair Corralation between Cia De and United States

Assuming the 90 days trading horizon Cia de Ferro is expected to generate 4.4 times more return on investment than United States. However, Cia De is 4.4 times more volatile than United States Steel. It trades about 0.03 of its potential returns per unit of risk. United States Steel is currently generating about 0.05 per unit of risk. If you would invest  1,191  in Cia de Ferro on September 4, 2024 and sell it today you would lose (394.00) from holding Cia de Ferro or give up 33.08% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	91.4%
Values	Daily Returns

Cia de Ferro  vs.  United States Steel

Cia de Ferro

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cia de Ferro has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Cia De is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

United States Steel

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in United States Steel are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, United States sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cia De and United States

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

The idea behind Cia de Ferro and United States Steel 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.