Correlation Between PACLIF and United States

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

By analyzing existing cross correlation between PACLIF 54 15 SEP 52 and United States Steel, you can compare the effects of market volatilities on PACLIF 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 PACLIF with a short position of United States. Check out your portfolio center. Please also check ongoing floating volatility patterns of PACLIF and United States.

Diversification Opportunities for PACLIF and United States

-0.01

Correlation Coefficient

PACLIF  United States

Good diversification

The 3 months correlation between PACLIF and United is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding PACLIF 54 15 SEP 52 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 PACLIF 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 PACLIF 54 15 SEP 52 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 PACLIF i.e., PACLIF and United States go up and down completely randomly.

Pair Corralation between PACLIF and United States

Assuming the 90 days trading horizon PACLIF is expected to generate 118.38 times less return on investment than United States. But when comparing it to its historical volatility, PACLIF 54 15 SEP 52 is 2.54 times less risky than United States. It trades about 0.0 of its potential returns per unit of risk. United States Steel is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  3,256  in United States Steel on December 2, 2024 and sell it today you would earn a total of  766.00  from holding United States Steel or generate 23.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	47.5%
Values	Daily Returns

PACLIF 54 15 SEP 52  vs.  United States Steel

PACLIF 54 15

Risk-Adjusted Performance

Very Weak

Over the last 90 days PACLIF 54 15 SEP 52 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for PACLIF 54 15 SEP 52 investors.

United States Steel

Risk-Adjusted Performance

Very Weak

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

Pair Trading with PACLIF and United States

The main advantage of trading using opposite PACLIF and United States positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PACLIF 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 PACLIF 54 15 SEP 52 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.

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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.