Correlation Between Schnitzer Steel and Aqua America

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

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

Diversification Opportunities for Schnitzer Steel and Aqua America

0.69

Correlation Coefficient

Schnitzer Steel  Aqua America

Poor diversification

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

Pair Corralation between Schnitzer Steel and Aqua America

Assuming the 90 days trading horizon Schnitzer Steel Industries is expected to under-perform the Aqua America. In addition to that, Schnitzer Steel is 2.1 times more volatile than Aqua America. It trades about -0.04 of its total potential returns per unit of risk. Aqua America is currently generating about -0.02 per unit of volatility. If you would invest  3,978  in Aqua America on October 11, 2024 and sell it today you would lose (605.00) from holding Aqua America or give up 15.21% of portfolio value over 90 days.

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

Schnitzer Steel Industries  vs.  Aqua America

Schnitzer Steel Indu

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Schnitzer Steel Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile 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.

Aqua America

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aqua America has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Aqua America is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Schnitzer Steel and Aqua America

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

The idea behind Schnitzer Steel Industries and Aqua America 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.