Correlation Between Steelcast and Consolidated Construction

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

By analyzing existing cross correlation between Steelcast Limited and Consolidated Construction Consortium, you can compare the effects of market volatilities on Steelcast and Consolidated Construction 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 Steelcast with a short position of Consolidated Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steelcast and Consolidated Construction.

Diversification Opportunities for Steelcast and Consolidated Construction

-0.33

Correlation Coefficient

Steelcast  Consolidated Construction

Very good diversification

The 3 months correlation between Steelcast and Consolidated is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Steelcast Limited and Consolidated Construction Cons in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consolidated Construction and Steelcast 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 Steelcast Limited are associated (or correlated) with Consolidated Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Consolidated Construction has no effect on the direction of Steelcast i.e., Steelcast and Consolidated Construction go up and down completely randomly.

Pair Corralation between Steelcast and Consolidated Construction

Assuming the 90 days trading horizon Steelcast is expected to generate 9.0 times less return on investment than Consolidated Construction. But when comparing it to its historical volatility, Steelcast Limited is 12.97 times less risky than Consolidated Construction. It trades about 0.07 of its potential returns per unit of risk. Consolidated Construction Consortium is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  140.00  in Consolidated Construction Consortium on October 8, 2024 and sell it today you would earn a total of  1,449  from holding Consolidated Construction Consortium or generate 1035.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.79%
Values	Daily Returns

Steelcast Limited  vs.  Consolidated Construction Cons

Steelcast Limited

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Steelcast Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting fundamental indicators, Steelcast sustained solid returns over the last few months and may actually be approaching a breakup point.

Consolidated Construction

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Consolidated Construction Consortium 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.

Pair Trading with Steelcast and Consolidated Construction

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

The idea behind Steelcast Limited and Consolidated Construction Consortium 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.