Correlation Between Invest Capital and Metropolitan Steel

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

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

Diversification Opportunities for Invest Capital and Metropolitan Steel

0.01

Correlation Coefficient

Invest Capital  Metropolitan Steel

Significant diversification

The 3 months correlation between Invest and Metropolitan is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Invest Capital Investment and Metropolitan Steel Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metropolitan Steel Corp and Invest Capital 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 Invest Capital Investment are associated (or correlated) with Metropolitan Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metropolitan Steel Corp has no effect on the direction of Invest Capital i.e., Invest Capital and Metropolitan Steel go up and down completely randomly.

Pair Corralation between Invest Capital and Metropolitan Steel

Assuming the 90 days trading horizon Invest Capital Investment is expected to under-perform the Metropolitan Steel. In addition to that, Invest Capital is 1.08 times more volatile than Metropolitan Steel Corp. It trades about -0.1 of its total potential returns per unit of risk. Metropolitan Steel Corp is currently generating about -0.01 per unit of volatility. If you would invest  1,075  in Metropolitan Steel Corp on October 23, 2024 and sell it today you would lose (15.00) from holding Metropolitan Steel Corp or give up 1.4% of portfolio value over 90 days.

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

Invest Capital Investment  vs.  Metropolitan Steel Corp

Invest Capital Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invest Capital Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward indicators, Invest Capital is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Metropolitan Steel Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Metropolitan Steel Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Invest Capital and Metropolitan Steel

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

The idea behind Invest Capital Investment and Metropolitan Steel 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.