Correlation Between Spectrum Brands and Worthington Steel

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

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

Diversification Opportunities for Spectrum Brands and Worthington Steel

0.62

Correlation Coefficient

Spectrum Brands  Worthington Steel

Poor diversification

The 3 months correlation between Spectrum and Worthington is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Spectrum Brands Holdings and Worthington Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Worthington Steel and Spectrum Brands 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 Spectrum Brands Holdings are associated (or correlated) with Worthington Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Worthington Steel has no effect on the direction of Spectrum Brands i.e., Spectrum Brands and Worthington Steel go up and down completely randomly.

Pair Corralation between Spectrum Brands and Worthington Steel

Considering the 90-day investment horizon Spectrum Brands Holdings is expected to generate 0.29 times more return on investment than Worthington Steel. However, Spectrum Brands Holdings is 3.46 times less risky than Worthington Steel. It trades about -0.59 of its potential returns per unit of risk. Worthington Steel is currently generating about -0.46 per unit of risk. If you would invest  9,589  in Spectrum Brands Holdings on October 8, 2024 and sell it today you would lose (1,192) from holding Spectrum Brands Holdings or give up 12.43% of portfolio value over 90 days.

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

Spectrum Brands Holdings  vs.  Worthington Steel

Spectrum Brands Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Spectrum Brands Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Worthington Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Worthington Steel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Worthington Steel is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Spectrum Brands and Worthington Steel

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

The idea behind Spectrum Brands Holdings and Worthington 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.