Correlation Between Friedman Industries and Synalloy

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

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

Diversification Opportunities for Friedman Industries and Synalloy

0.62

Correlation Coefficient

Friedman Industries  Synalloy

Poor diversification

The 3 months correlation between Friedman and Synalloy is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Friedman Industries and Synalloy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Synalloy and Friedman Industries 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 Friedman Industries are associated (or correlated) with Synalloy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Synalloy has no effect on the direction of Friedman Industries i.e., Friedman Industries and Synalloy go up and down completely randomly.

Pair Corralation between Friedman Industries and Synalloy

Considering the 90-day investment horizon Friedman Industries is expected to generate 1.36 times less return on investment than Synalloy. In addition to that, Friedman Industries is 1.42 times more volatile than Synalloy. It trades about 0.05 of its total potential returns per unit of risk. Synalloy is currently generating about 0.09 per unit of volatility. If you would invest  1,084  in Synalloy on September 30, 2024 and sell it today you would earn a total of  44.00  from holding Synalloy or generate 4.06% return on investment over 90 days.

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

Friedman Industries  vs.  Synalloy

Friedman Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Friedman Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Friedman Industries is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Synalloy

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Synalloy are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Synalloy unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Friedman Industries and Synalloy

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

The idea behind Friedman Industries and Synalloy 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.