Correlation Between Usinas Siderurgicas and Iron Road

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

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

Diversification Opportunities for Usinas Siderurgicas and Iron Road

0.0

Correlation Coefficient

Usinas Siderurgicas  Iron Road

Pay attention - limited upside

The 3 months correlation between Usinas and Iron is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Usinas Siderurgicas de and Iron Road Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iron Road Limited and Usinas Siderurgicas 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 Usinas Siderurgicas de are associated (or correlated) with Iron Road. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iron Road Limited has no effect on the direction of Usinas Siderurgicas i.e., Usinas Siderurgicas and Iron Road go up and down completely randomly.

Pair Corralation between Usinas Siderurgicas and Iron Road

Assuming the 90 days horizon Usinas Siderurgicas de is expected to generate 1.93 times more return on investment than Iron Road. However, Usinas Siderurgicas is 1.93 times more volatile than Iron Road Limited. It trades about -0.03 of its potential returns per unit of risk. Iron Road Limited is currently generating about -0.06 per unit of risk. If you would invest  151.00  in Usinas Siderurgicas de on September 23, 2024 and sell it today you would lose (55.00) from holding Usinas Siderurgicas de or give up 36.42% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	98.52%
Values	Daily Returns

Usinas Siderurgicas de  vs.  Iron Road Limited

Usinas Siderurgicas

Risk-Adjusted Performance

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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 fairly strong basic indicators, Usinas Siderurgicas is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Iron Road Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Iron Road Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Iron Road is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Usinas Siderurgicas and Iron Road

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

The idea behind Usinas Siderurgicas de and Iron Road Limited 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.