Correlation Between International Steels and Quice Food

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

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

Diversification Opportunities for International Steels and Quice Food

0.6

Correlation Coefficient

International Steels  Quice Food

Poor diversification

The 3 months correlation between International and Quice is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding International Steels and Quice Food Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quice Food Industries and International Steels 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 International Steels are associated (or correlated) with Quice Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quice Food Industries has no effect on the direction of International Steels i.e., International Steels and Quice Food go up and down completely randomly.

Pair Corralation between International Steels and Quice Food

Assuming the 90 days trading horizon International Steels is expected to generate 1.01 times more return on investment than Quice Food. However, International Steels is 1.01 times more volatile than Quice Food Industries. It trades about 0.26 of its potential returns per unit of risk. Quice Food Industries is currently generating about -0.15 per unit of risk. If you would invest  8,268  in International Steels on October 11, 2024 and sell it today you would earn a total of  1,305  from holding International Steels or generate 15.78% return on investment over 90 days.

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

International Steels  vs.  Quice Food Industries

International Steels

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in International Steels are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, International Steels reported solid returns over the last few months and may actually be approaching a breakup point.

Quice Food Industries

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Quice Food Industries are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite weak forward indicators, Quice Food disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with International Steels and Quice Food

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

The idea behind International Steels and Quice Food Industries 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.