Correlation Between Steel Authority and Genus Paper

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

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

Diversification Opportunities for Steel Authority and Genus Paper

0.91

Correlation Coefficient

Steel Authority  Genus Paper

Almost no diversification

The 3 months correlation between Steel and Genus is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Steel Authority of and Genus Paper Boards in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Genus Paper Boards and Steel Authority 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 Steel Authority of are associated (or correlated) with Genus Paper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Genus Paper Boards has no effect on the direction of Steel Authority i.e., Steel Authority and Genus Paper go up and down completely randomly.

Pair Corralation between Steel Authority and Genus Paper

Assuming the 90 days trading horizon Steel Authority of is expected to under-perform the Genus Paper. But the stock apears to be less risky and, when comparing its historical volatility, Steel Authority of is 1.39 times less risky than Genus Paper. The stock trades about -0.04 of its potential returns per unit of risk. The Genus Paper Boards is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  2,236  in Genus Paper Boards on October 6, 2024 and sell it today you would lose (60.00) from holding Genus Paper Boards or give up 2.68% of portfolio value over 90 days.

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

Steel Authority of  vs.  Genus Paper Boards

Steel Authority

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Steel Authority of has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Genus Paper Boards

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Genus Paper Boards has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Genus Paper is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Steel Authority and Genus Paper

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

The idea behind Steel Authority of and Genus Paper Boards 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.