Correlation Between Steel Authority and Union Bank

Can any of the company-specific risk be diversified away by investing in both Steel Authority and Union Bank 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 Union Bank 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 Union Bank of, you can compare the effects of market volatilities on Steel Authority and Union Bank 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 Union Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Authority and Union Bank.

Diversification Opportunities for Steel Authority and Union Bank

0.1

Correlation Coefficient

Steel Authority  Union Bank

Average diversification

The 3 months correlation between Steel and Union is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Steel Authority of and Union Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Union Bank 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 Union Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Union Bank has no effect on the direction of Steel Authority i.e., Steel Authority and Union Bank go up and down completely randomly.

Pair Corralation between Steel Authority and Union Bank

Assuming the 90 days trading horizon Steel Authority of is expected to generate 1.23 times more return on investment than Union Bank. However, Steel Authority is 1.23 times more volatile than Union Bank of. It trades about 0.02 of its potential returns per unit of risk. Union Bank of is currently generating about 0.02 per unit of risk. If you would invest  11,327  in Steel Authority of on October 6, 2024 and sell it today you would earn a total of  90.00  from holding Steel Authority of or generate 0.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.59%
Values	Daily Returns

Steel Authority of  vs.  Union Bank of

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.

Union Bank

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Union Bank of are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Union Bank may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Steel Authority and Union Bank

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

The idea behind Steel Authority of and Union Bank of 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 CEOs Directory module to screen CEOs from public companies around the world.