Correlation Between Hilton Metal and MSP Steel

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

By analyzing existing cross correlation between Hilton Metal Forging and MSP Steel Power, you can compare the effects of market volatilities on Hilton Metal and MSP 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 Hilton Metal with a short position of MSP Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hilton Metal and MSP Steel.

Diversification Opportunities for Hilton Metal and MSP Steel

0.68

Correlation Coefficient

Hilton Metal  MSP Steel

Poor diversification

The 3 months correlation between Hilton and MSP is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Hilton Metal Forging and MSP Steel Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MSP Steel Power and Hilton Metal 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 Hilton Metal Forging are associated (or correlated) with MSP Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MSP Steel Power has no effect on the direction of Hilton Metal i.e., Hilton Metal and MSP Steel go up and down completely randomly.

Pair Corralation between Hilton Metal and MSP Steel

Assuming the 90 days trading horizon Hilton Metal Forging is expected to generate 1.5 times more return on investment than MSP Steel. However, Hilton Metal is 1.5 times more volatile than MSP Steel Power. It trades about -0.04 of its potential returns per unit of risk. MSP Steel Power is currently generating about -0.29 per unit of risk. If you would invest  9,183  in Hilton Metal Forging on December 6, 2024 and sell it today you would lose (1,494) from holding Hilton Metal Forging or give up 16.27% of portfolio value over 90 days.

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

Hilton Metal Forging  vs.  MSP Steel Power

Hilton Metal Forging

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hilton Metal Forging has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

MSP Steel Power

Risk-Adjusted Performance

Very Weak

Over the last 90 days MSP Steel Power has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Hilton Metal and MSP Steel

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

The idea behind Hilton Metal Forging and MSP Steel Power 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.