Correlation Between Histeel and Finebesteel

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

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

Diversification Opportunities for Histeel and Finebesteel

-0.14

Correlation Coefficient

Histeel  Finebesteel

Good diversification

The 3 months correlation between Histeel and Finebesteel is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Histeel and Finebesteel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Finebesteel and Histeel 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 Histeel are associated (or correlated) with Finebesteel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Finebesteel has no effect on the direction of Histeel i.e., Histeel and Finebesteel go up and down completely randomly.

Pair Corralation between Histeel and Finebesteel

Assuming the 90 days trading horizon Histeel is expected to under-perform the Finebesteel. But the stock apears to be less risky and, when comparing its historical volatility, Histeel is 1.07 times less risky than Finebesteel. The stock trades about -0.03 of its potential returns per unit of risk. The Finebesteel is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  91,000  in Finebesteel on September 1, 2024 and sell it today you would earn a total of  13,700  from holding Finebesteel or generate 15.05% return on investment over 90 days.

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

Histeel  vs.  Finebesteel

Histeel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Histeel has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Histeel is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Finebesteel

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Finebesteel are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Finebesteel sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Histeel and Finebesteel

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

The idea behind Histeel and Finebesteel 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.