Correlation Between Steel Partners and Seaboard

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

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

Diversification Opportunities for Steel Partners and Seaboard

0.69

Correlation Coefficient

Steel Partners  Seaboard

Poor diversification

The 3 months correlation between Steel and Seaboard is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Steel Partners Holdings and Seaboard in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seaboard and Steel Partners 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 Partners Holdings are associated (or correlated) with Seaboard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seaboard has no effect on the direction of Steel Partners i.e., Steel Partners and Seaboard go up and down completely randomly.

Pair Corralation between Steel Partners and Seaboard

Assuming the 90 days trading horizon Steel Partners is expected to generate 7.54 times less return on investment than Seaboard. But when comparing it to its historical volatility, Steel Partners Holdings is 9.31 times less risky than Seaboard. It trades about 0.12 of its potential returns per unit of risk. Seaboard is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  238,911  in Seaboard on December 30, 2024 and sell it today you would earn a total of  32,218  from holding Seaboard or generate 13.49% return on investment over 90 days.

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

Steel Partners Holdings  vs.  Seaboard

Steel Partners Holdings

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Steel Partners Holdings are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Steel Partners is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Seaboard

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Seaboard are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating technical and fundamental indicators, Seaboard sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Steel Partners and Seaboard

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

The idea behind Steel Partners Holdings and Seaboard 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.