Correlation Between Step One and Sky Metals

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

By analyzing existing cross correlation between Step One Clothing and Sky Metals, you can compare the effects of market volatilities on Step One and Sky Metals 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 Step One with a short position of Sky Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Step One and Sky Metals.

Diversification Opportunities for Step One and Sky Metals

0.66

Correlation Coefficient

Step One  Sky Metals

Poor diversification

The 3 months correlation between Step and Sky is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Step One Clothing and Sky Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sky Metals and Step One 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 Step One Clothing are associated (or correlated) with Sky Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sky Metals has no effect on the direction of Step One i.e., Step One and Sky Metals go up and down completely randomly.

Pair Corralation between Step One and Sky Metals

Assuming the 90 days trading horizon Step One Clothing is expected to under-perform the Sky Metals. In addition to that, Step One is 1.67 times more volatile than Sky Metals. It trades about -0.08 of its total potential returns per unit of risk. Sky Metals is currently generating about -0.03 per unit of volatility. If you would invest  5.40  in Sky Metals on December 28, 2024 and sell it today you would lose (0.40) from holding Sky Metals or give up 7.41% of portfolio value over 90 days.

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

Step One Clothing  vs.  Sky Metals

Step One Clothing

Risk-Adjusted Performance

Very Weak

Over the last 90 days Step One Clothing has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Sky Metals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sky Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Sky Metals is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Step One and Sky Metals

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

The idea behind Step One Clothing and Sky Metals 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.