Correlation Between Russel Metals and Chemtrade Logistics

Can any of the company-specific risk be diversified away by investing in both Russel Metals and Chemtrade Logistics 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 Russel Metals and Chemtrade Logistics into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Russel Metals and Chemtrade Logistics Income, you can compare the effects of market volatilities on Russel Metals and Chemtrade Logistics 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 Russel Metals with a short position of Chemtrade Logistics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Russel Metals and Chemtrade Logistics.

Diversification Opportunities for Russel Metals and Chemtrade Logistics

0.77

Correlation Coefficient

Russel Metals  Chemtrade Logistics

Poor diversification

The 3 months correlation between Russel and Chemtrade is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Russel Metals and Chemtrade Logistics Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chemtrade Logistics and Russel Metals 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 Russel Metals are associated (or correlated) with Chemtrade Logistics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chemtrade Logistics has no effect on the direction of Russel Metals i.e., Russel Metals and Chemtrade Logistics go up and down completely randomly.

Pair Corralation between Russel Metals and Chemtrade Logistics

Assuming the 90 days trading horizon Russel Metals is expected to generate 0.72 times more return on investment than Chemtrade Logistics. However, Russel Metals is 1.39 times less risky than Chemtrade Logistics. It trades about -0.08 of its potential returns per unit of risk. Chemtrade Logistics Income is currently generating about -0.2 per unit of risk. If you would invest  4,339  in Russel Metals on September 24, 2024 and sell it today you would lose (85.00) from holding Russel Metals or give up 1.96% of portfolio value over 90 days.

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

Russel Metals  vs.  Chemtrade Logistics Income

Russel Metals

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Russel Metals are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Russel Metals is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Chemtrade Logistics

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Chemtrade Logistics Income are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, Chemtrade Logistics is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Russel Metals and Chemtrade Logistics

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

The idea behind Russel Metals and Chemtrade Logistics Income 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.