Correlation Between Salzgitter and Usinas Siderurgicas

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

By analyzing existing cross correlation between Salzgitter AG ADR and Usinas Siderurgicas de, you can compare the effects of market volatilities on Salzgitter and Usinas Siderurgicas 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 Salzgitter with a short position of Usinas Siderurgicas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Salzgitter and Usinas Siderurgicas.

Diversification Opportunities for Salzgitter and Usinas Siderurgicas

0.05

Correlation Coefficient

Salzgitter  Usinas Siderurgicas

Significant diversification

The 3 months correlation between Salzgitter and Usinas is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Salzgitter AG ADR and Usinas Siderurgicas de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Usinas Siderurgicas and Salzgitter 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 Salzgitter AG ADR are associated (or correlated) with Usinas Siderurgicas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Usinas Siderurgicas has no effect on the direction of Salzgitter i.e., Salzgitter and Usinas Siderurgicas go up and down completely randomly.

Pair Corralation between Salzgitter and Usinas Siderurgicas

Assuming the 90 days horizon Salzgitter AG ADR is expected to generate 0.84 times more return on investment than Usinas Siderurgicas. However, Salzgitter AG ADR is 1.19 times less risky than Usinas Siderurgicas. It trades about -0.23 of its potential returns per unit of risk. Usinas Siderurgicas de is currently generating about -0.37 per unit of risk. If you would invest  177.00  in Salzgitter AG ADR on September 27, 2024 and sell it today you would lose (19.00) from holding Salzgitter AG ADR or give up 10.73% of portfolio value over 90 days.

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

Salzgitter AG ADR  vs.  Usinas Siderurgicas de

Salzgitter AG ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Salzgitter AG ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Salzgitter is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Usinas Siderurgicas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Usinas Siderurgicas de 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 fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Salzgitter and Usinas Siderurgicas

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

The idea behind Salzgitter AG ADR and Usinas Siderurgicas de 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.