Correlation Between Steelcast and Foods Inns

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

By analyzing existing cross correlation between Steelcast Limited and Foods Inns Limited, you can compare the effects of market volatilities on Steelcast and Foods Inns 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 Foods Inns. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steelcast and Foods Inns.

Diversification Opportunities for Steelcast and Foods Inns

-0.23

Correlation Coefficient

Steelcast  Foods Inns

Very good diversification

The 3 months correlation between Steelcast and Foods is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Steelcast Limited and Foods Inns Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Foods Inns Limited 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 Foods Inns. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Foods Inns Limited has no effect on the direction of Steelcast i.e., Steelcast and Foods Inns go up and down completely randomly.

Pair Corralation between Steelcast and Foods Inns

Assuming the 90 days trading horizon Steelcast Limited is expected to generate 2.11 times more return on investment than Foods Inns. However, Steelcast is 2.11 times more volatile than Foods Inns Limited. It trades about 0.13 of its potential returns per unit of risk. Foods Inns Limited is currently generating about -0.05 per unit of risk. If you would invest  80,010  in Steelcast Limited on October 3, 2024 and sell it today you would earn a total of  5,915  from holding Steelcast Limited or generate 7.39% return on investment over 90 days.

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

Steelcast Limited  vs.  Foods Inns Limited

Steelcast Limited

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Steelcast Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain fundamental indicators, Steelcast may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Foods Inns Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Foods Inns Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Steelcast and Foods Inns

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

The idea behind Steelcast Limited and Foods Inns Limited 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.