Correlation Between International Steels and Organic Meat

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

By analyzing existing cross correlation between International Steels and The Organic Meat, you can compare the effects of market volatilities on International Steels and Organic Meat 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 Organic Meat. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Steels and Organic Meat.

Diversification Opportunities for International Steels and Organic Meat

0.02

Correlation Coefficient

International Steels  Organic Meat

Significant diversification

The 3 months correlation between International and Organic is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding International Steels and The Organic Meat in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Organic Meat 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 Organic Meat. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Organic Meat has no effect on the direction of International Steels i.e., International Steels and Organic Meat go up and down completely randomly.

Pair Corralation between International Steels and Organic Meat

Assuming the 90 days trading horizon International Steels is expected to generate 0.86 times more return on investment than Organic Meat. However, International Steels is 1.17 times less risky than Organic Meat. It trades about 0.1 of its potential returns per unit of risk. The Organic Meat is currently generating about 0.07 per unit of risk. If you would invest  3,345  in International Steels on October 26, 2024 and sell it today you would earn a total of  5,898  from holding International Steels or generate 176.32% return on investment over 90 days.

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

International Steels  vs.  The Organic Meat

International Steels

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in International Steels are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, International Steels reported solid returns over the last few months and may actually be approaching a breakup point.

Organic Meat

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with International Steels and Organic Meat

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

The idea behind International Steels and The Organic Meat 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.