Correlation Between Ni Steel and Samwon Steel

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

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

Diversification Opportunities for Ni Steel and Samwon Steel

0.57

Correlation Coefficient

Ni Steel  Samwon Steel

Very weak diversification

The 3 months correlation between 008260 and Samwon is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Ni Steel and Samwon Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Samwon Steel and Ni Steel 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 Ni Steel are associated (or correlated) with Samwon Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Samwon Steel has no effect on the direction of Ni Steel i.e., Ni Steel and Samwon Steel go up and down completely randomly.

Pair Corralation between Ni Steel and Samwon Steel

Assuming the 90 days trading horizon Ni Steel is expected to under-perform the Samwon Steel. In addition to that, Ni Steel is 1.85 times more volatile than Samwon Steel. It trades about -0.06 of its total potential returns per unit of risk. Samwon Steel is currently generating about -0.08 per unit of volatility. If you would invest  249,500  in Samwon Steel on September 15, 2024 and sell it today you would lose (15,500) from holding Samwon Steel or give up 6.21% of portfolio value over 90 days.

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

Ni Steel  vs.  Samwon Steel

Ni Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ni Steel has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Samwon Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Samwon Steel has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Ni Steel and Samwon Steel

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

The idea behind Ni Steel and Samwon Steel 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.