Correlation Between Steelcast and Home First

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

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

Diversification Opportunities for Steelcast and Home First

-0.56

Correlation Coefficient

Steelcast  Home First

Excellent diversification

The 3 months correlation between Steelcast and Home is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Steelcast Limited and Home First Finance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home First Finance 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 Home First. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home First Finance has no effect on the direction of Steelcast i.e., Steelcast and Home First go up and down completely randomly.

Pair Corralation between Steelcast and Home First

Assuming the 90 days trading horizon Steelcast Limited is expected to under-perform the Home First. In addition to that, Steelcast is 1.41 times more volatile than Home First Finance. It trades about -0.02 of its total potential returns per unit of risk. Home First Finance is currently generating about 0.1 per unit of volatility. If you would invest  100,010  in Home First Finance on October 21, 2024 and sell it today you would earn a total of  3,010  from holding Home First Finance or generate 3.01% return on investment over 90 days.

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

Steelcast Limited  vs.  Home First Finance

Steelcast Limited

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Steelcast Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent fundamental indicators, Steelcast may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Home First Finance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Home First Finance has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest uncertain performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Steelcast and Home First

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

The idea behind Steelcast Limited and Home First Finance 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.

Check out your portfolio center.

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 Bonds Directory module to find actively traded corporate debentures issued by US companies.