Correlation Between Jay Mart and CSP Steel

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

By analyzing existing cross correlation between Jay Mart Public and CSP Steel Center, you can compare the effects of market volatilities on Jay Mart and CSP 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 Jay Mart with a short position of CSP Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jay Mart and CSP Steel.

Diversification Opportunities for Jay Mart and CSP Steel

0.35

Correlation Coefficient

Jay Mart  CSP Steel

Weak diversification

The 3 months correlation between Jay and CSP is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Jay Mart Public and CSP Steel Center in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSP Steel Center and Jay Mart 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 Jay Mart Public are associated (or correlated) with CSP Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CSP Steel Center has no effect on the direction of Jay Mart i.e., Jay Mart and CSP Steel go up and down completely randomly.

Pair Corralation between Jay Mart and CSP Steel

Assuming the 90 days trading horizon Jay Mart Public is expected to generate 1.75 times more return on investment than CSP Steel. However, Jay Mart is 1.75 times more volatile than CSP Steel Center. It trades about 0.07 of its potential returns per unit of risk. CSP Steel Center is currently generating about 0.04 per unit of risk. If you would invest  2,669  in Jay Mart Public on December 3, 2024 and sell it today you would lose (1,629) from holding Jay Mart Public or give up 61.03% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.67%
Values	Daily Returns

Jay Mart Public  vs.  CSP Steel Center

Jay Mart Public

Risk-Adjusted Performance

OK

Over the last 90 days Jay Mart Public has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively conflicting basic indicators, Jay Mart reported solid returns over the last few months and may actually be approaching a breakup point.

CSP Steel Center

Risk-Adjusted Performance

Very Weak

Over the last 90 days CSP Steel Center has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Jay Mart and CSP Steel

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

The idea behind Jay Mart Public and CSP Steel Center 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.