Correlation Between SAFETY MEDICAL and United States

Can any of the company-specific risk be diversified away by investing in both SAFETY MEDICAL and United States 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 SAFETY MEDICAL and United States into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SAFETY MEDICAL PROD and United States Steel, you can compare the effects of market volatilities on SAFETY MEDICAL and United States 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 SAFETY MEDICAL with a short position of United States. Check out your portfolio center. Please also check ongoing floating volatility patterns of SAFETY MEDICAL and United States.

Diversification Opportunities for SAFETY MEDICAL and United States

-0.74

Correlation Coefficient

SAFETY MEDICAL  United States

Pay attention - limited upside

The 3 months correlation between SAFETY and United is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding SAFETY MEDICAL PROD and United States Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United States Steel and SAFETY MEDICAL 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 SAFETY MEDICAL PROD are associated (or correlated) with United States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United States Steel has no effect on the direction of SAFETY MEDICAL i.e., SAFETY MEDICAL and United States go up and down completely randomly.

Pair Corralation between SAFETY MEDICAL and United States

Assuming the 90 days trading horizon SAFETY MEDICAL PROD is expected to under-perform the United States. But the stock apears to be less risky and, when comparing its historical volatility, SAFETY MEDICAL PROD is 1.13 times less risky than United States. The stock trades about -0.19 of its potential returns per unit of risk. The United States Steel is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  3,089  in United States Steel on September 4, 2024 and sell it today you would earn a total of  764.00  from holding United States Steel or generate 24.73% return on investment over 90 days.

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

SAFETY MEDICAL PROD  vs.  United States Steel

SAFETY MEDICAL PROD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SAFETY MEDICAL PROD has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's primary indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

United States Steel

Risk-Adjusted Performance

9 of 100

OK

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

Pair Trading with SAFETY MEDICAL and United States

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

The idea behind SAFETY MEDICAL PROD and United States Steel 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.