Correlation Between Tungsten West and United States

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

By analyzing existing cross correlation between Tungsten West PLC and United States Steel, you can compare the effects of market volatilities on Tungsten West and United States 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 Tungsten West with a short position of United States. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tungsten West and United States.

Diversification Opportunities for Tungsten West and United States

-0.45

Correlation Coefficient

Tungsten West  United States

Very good diversification

The 3 months correlation between Tungsten and United is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Tungsten West PLC and United States Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United States Steel and Tungsten West 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 Tungsten West PLC are associated (or correlated) with United States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United States Steel has no effect on the direction of Tungsten West i.e., Tungsten West and United States go up and down completely randomly.

Pair Corralation between Tungsten West and United States

Assuming the 90 days trading horizon Tungsten West is expected to generate 1.67 times less return on investment than United States. In addition to that, Tungsten West is 1.54 times more volatile than United States Steel. It trades about 0.02 of its total potential returns per unit of risk. United States Steel is currently generating about 0.05 per unit of volatility. If you would invest  3,771  in United States Steel on August 30, 2024 and sell it today you would earn a total of  254.00  from holding United States Steel or generate 6.74% return on investment over 90 days.

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

Tungsten West PLC  vs.  United States Steel

Tungsten West PLC

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tungsten West PLC are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Tungsten West may actually be approaching a critical reversion point that can send shares even higher in December 2024.

United States Steel

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in United States Steel are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, United States unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tungsten West and United States

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

The idea behind Tungsten West PLC and United States Steel 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 Transaction History module to view history of all your transactions and understand their impact on performance.