Correlation Between United States and MAHLE Metal

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

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

Diversification Opportunities for United States and MAHLE Metal

-0.43

Correlation Coefficient

United States  MAHLE Metal

Very good diversification

The 3 months correlation between United and MAHLE is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel and MAHLE Metal Leve in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MAHLE Metal Leve and United States 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 United States Steel are associated (or correlated) with MAHLE Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MAHLE Metal Leve has no effect on the direction of United States i.e., United States and MAHLE Metal go up and down completely randomly.

Pair Corralation between United States and MAHLE Metal

Assuming the 90 days trading horizon United States Steel is expected to generate 2.52 times more return on investment than MAHLE Metal. However, United States is 2.52 times more volatile than MAHLE Metal Leve. It trades about 0.17 of its potential returns per unit of risk. MAHLE Metal Leve is currently generating about -0.17 per unit of risk. If you would invest  16,836  in United States Steel on September 5, 2024 and sell it today you would earn a total of  6,024  from holding United States Steel or generate 35.78% return on investment over 90 days.

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

United States Steel  vs.  MAHLE Metal Leve

United States Steel

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in United States Steel are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, United States sustained solid returns over the last few months and may actually be approaching a breakup point.

MAHLE Metal Leve

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MAHLE Metal Leve 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 January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with United States and MAHLE Metal

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

The idea behind United States Steel and MAHLE Metal Leve 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.