Correlation Between Outokumpu Oyj and Companhia Siderurgica

Can any of the company-specific risk be diversified away by investing in both Outokumpu Oyj and Companhia Siderurgica 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 Outokumpu Oyj and Companhia Siderurgica into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Outokumpu Oyj ADR and Companhia Siderurgica Nacional, you can compare the effects of market volatilities on Outokumpu Oyj and Companhia Siderurgica 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 Outokumpu Oyj with a short position of Companhia Siderurgica. Check out your portfolio center. Please also check ongoing floating volatility patterns of Outokumpu Oyj and Companhia Siderurgica.

Diversification Opportunities for Outokumpu Oyj and Companhia Siderurgica

0.82

Correlation Coefficient

Outokumpu Oyj  Companhia Siderurgica

Very poor diversification

The 3 months correlation between Outokumpu and Companhia is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Outokumpu Oyj ADR and Companhia Siderurgica Nacional in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Companhia Siderurgica and Outokumpu Oyj 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 Outokumpu Oyj ADR are associated (or correlated) with Companhia Siderurgica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Companhia Siderurgica has no effect on the direction of Outokumpu Oyj i.e., Outokumpu Oyj and Companhia Siderurgica go up and down completely randomly.

Pair Corralation between Outokumpu Oyj and Companhia Siderurgica

Assuming the 90 days horizon Outokumpu Oyj ADR is expected to under-perform the Companhia Siderurgica. But the pink sheet apears to be less risky and, when comparing its historical volatility, Outokumpu Oyj ADR is 1.14 times less risky than Companhia Siderurgica. The pink sheet trades about -0.07 of its potential returns per unit of risk. The Companhia Siderurgica Nacional is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  199.00  in Companhia Siderurgica Nacional on September 12, 2024 and sell it today you would lose (5.00) from holding Companhia Siderurgica Nacional or give up 2.51% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.45%
Values	Daily Returns

Outokumpu Oyj ADR  vs.  Companhia Siderurgica Nacional

Outokumpu Oyj ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Outokumpu Oyj ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's forward-looking signals remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Companhia Siderurgica

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Companhia Siderurgica Nacional has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward indicators, Companhia Siderurgica is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Outokumpu Oyj and Companhia Siderurgica

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

The idea behind Outokumpu Oyj ADR and Companhia Siderurgica Nacional 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.