Correlation Between United States and AP Mller

Can any of the company-specific risk be diversified away by investing in both United States and AP Mller 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 AP Mller 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 AP Mller , you can compare the effects of market volatilities on United States and AP Mller 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 AP Mller. Check out your portfolio center. Please also check ongoing floating volatility patterns of United States and AP Mller.

Diversification Opportunities for United States and AP Mller

-0.11

Correlation Coefficient

United States  AP Mller

Good diversification

The 3 months correlation between United and DP4A is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel and AP Mller in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AP Mller 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 AP Mller. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AP Mller has no effect on the direction of United States i.e., United States and AP Mller go up and down completely randomly.

Pair Corralation between United States and AP Mller

Assuming the 90 days trading horizon United States Steel is expected to under-perform the AP Mller. In addition to that, United States is 1.63 times more volatile than AP Mller . It trades about -0.18 of its total potential returns per unit of risk. AP Mller is currently generating about 0.13 per unit of volatility. If you would invest  145,100  in AP Mller on October 9, 2024 and sell it today you would earn a total of  14,600  from holding AP Mller or generate 10.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.37%
Values	Daily Returns

United States Steel  vs.  AP Mller

United States Steel

Risk-Adjusted Performance

0 of 100

Very Weak

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

AP Mller

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AP Mller are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, AP Mller reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with United States and AP Mller

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

The idea behind United States Steel and AP Mller 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.