Correlation Between Mayfield Childcare and Bisalloy Steel

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

By analyzing existing cross correlation between Mayfield Childcare and Bisalloy Steel Group, you can compare the effects of market volatilities on Mayfield Childcare and Bisalloy 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 Mayfield Childcare with a short position of Bisalloy Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mayfield Childcare and Bisalloy Steel.

Diversification Opportunities for Mayfield Childcare and Bisalloy Steel

-0.43

Correlation Coefficient

Mayfield Childcare  Bisalloy Steel

Very good diversification

The 3 months correlation between Mayfield and Bisalloy is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Mayfield Childcare and Bisalloy Steel Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bisalloy Steel Group and Mayfield Childcare 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 Mayfield Childcare are associated (or correlated) with Bisalloy Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bisalloy Steel Group has no effect on the direction of Mayfield Childcare i.e., Mayfield Childcare and Bisalloy Steel go up and down completely randomly.

Pair Corralation between Mayfield Childcare and Bisalloy Steel

Assuming the 90 days trading horizon Mayfield Childcare is expected to generate 1.5 times more return on investment than Bisalloy Steel. However, Mayfield Childcare is 1.5 times more volatile than Bisalloy Steel Group. It trades about -0.05 of its potential returns per unit of risk. Bisalloy Steel Group is currently generating about -0.1 per unit of risk. If you would invest  49.00  in Mayfield Childcare on October 22, 2024 and sell it today you would lose (4.00) from holding Mayfield Childcare or give up 8.16% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Mayfield Childcare  vs.  Bisalloy Steel Group

Mayfield Childcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mayfield Childcare has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Bisalloy Steel Group

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bisalloy Steel Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Bisalloy Steel unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mayfield Childcare and Bisalloy Steel

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

The idea behind Mayfield Childcare and Bisalloy Steel Group 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.