Correlation Between United States and Origin Materials

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

Diversification Opportunities for United States and Origin Materials

-0.08

Correlation Coefficient

United States  Origin Materials

Good diversification

The 3 months correlation between United and Origin is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel and Origin Materials Warrant in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Origin Materials Warrant 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 Origin Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Origin Materials Warrant has no effect on the direction of United States i.e., United States and Origin Materials go up and down completely randomly.

Pair Corralation between United States and Origin Materials

Taking into account the 90-day investment horizon United States Steel is expected to under-perform the Origin Materials. But the stock apears to be less risky and, when comparing its historical volatility, United States Steel is 5.36 times less risky than Origin Materials. The stock trades about -0.27 of its potential returns per unit of risk. The Origin Materials Warrant is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  6.75  in Origin Materials Warrant on September 21, 2024 and sell it today you would earn a total of  1.75  from holding Origin Materials Warrant or generate 25.93% return on investment over 90 days.

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

United States Steel  vs.  Origin Materials Warrant

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. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Origin Materials Warrant

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Origin Materials Warrant has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Origin Materials is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with United States and Origin Materials

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

The idea behind United States Steel and Origin Materials Warrant 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.