Correlation Between United States and Compania

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

Diversification Opportunities for United States and Compania

-0.83

Correlation Coefficient

United States  Compania

Pay attention - limited upside

The 3 months correlation between United and Compania is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel and Compania de Transporte in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compania de Transporte 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 Compania. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compania de Transporte has no effect on the direction of United States i.e., United States and Compania go up and down completely randomly.

Pair Corralation between United States and Compania

Given the investment horizon of 90 days United States Steel is expected to generate 0.77 times more return on investment than Compania. However, United States Steel is 1.3 times less risky than Compania. It trades about 0.25 of its potential returns per unit of risk. Compania de Transporte is currently generating about -0.1 per unit of risk. If you would invest  1,237,500  in United States Steel on December 30, 2024 and sell it today you would earn a total of  635,000  from holding United States Steel or generate 51.31% return on investment over 90 days.

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

United States Steel  vs.  Compania de Transporte

United States Steel

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in United States Steel are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, United States sustained solid returns over the last few months and may actually be approaching a breakup point.

Compania de Transporte

Risk-Adjusted Performance

Very Weak

Over the last 90 days Compania de Transporte has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with United States and Compania

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

The idea behind United States Steel and Compania de Transporte 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.