Correlation Between Steelcast and Steel Authority

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

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

Diversification Opportunities for Steelcast and Steel Authority

0.08

Correlation Coefficient

Steelcast  Steel Authority

Significant diversification

The 3 months correlation between Steelcast and Steel is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Steelcast Limited and Steel Authority of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steel Authority 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 Steel Authority. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Steel Authority has no effect on the direction of Steelcast i.e., Steelcast and Steel Authority go up and down completely randomly.

Pair Corralation between Steelcast and Steel Authority

Assuming the 90 days trading horizon Steelcast Limited is expected to generate 1.14 times more return on investment than Steel Authority. However, Steelcast is 1.14 times more volatile than Steel Authority of. It trades about 0.03 of its potential returns per unit of risk. Steel Authority of is currently generating about -0.06 per unit of risk. If you would invest  79,847  in Steelcast Limited on December 2, 2024 and sell it today you would earn a total of  1,768  from holding Steelcast Limited or generate 2.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Steelcast Limited  vs.  Steel Authority of

Steelcast Limited

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Steelcast Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, Steelcast is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Steel Authority

Risk-Adjusted Performance

Very Weak

Over the last 90 days Steel Authority of has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Steelcast and Steel Authority

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

The idea behind Steelcast Limited and Steel Authority of 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.