Correlation Between Settlebank and Choil Aluminum

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

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

Diversification Opportunities for Settlebank and Choil Aluminum

0.76

Correlation Coefficient

Settlebank  Choil Aluminum

Poor diversification

The 3 months correlation between Settlebank and Choil is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Settlebank and Choil Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Choil Aluminum and Settlebank 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 Settlebank are associated (or correlated) with Choil Aluminum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Choil Aluminum has no effect on the direction of Settlebank i.e., Settlebank and Choil Aluminum go up and down completely randomly.

Pair Corralation between Settlebank and Choil Aluminum

Assuming the 90 days trading horizon Settlebank is expected to under-perform the Choil Aluminum. In addition to that, Settlebank is 1.02 times more volatile than Choil Aluminum. It trades about -0.06 of its total potential returns per unit of risk. Choil Aluminum is currently generating about -0.05 per unit of volatility. If you would invest  159,900  in Choil Aluminum on September 17, 2024 and sell it today you would lose (16,900) from holding Choil Aluminum or give up 10.57% of portfolio value over 90 days.

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

Settlebank  vs.  Choil Aluminum

Settlebank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Settlebank 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.

Choil Aluminum

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Choil Aluminum 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 Settlebank and Choil Aluminum

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

The idea behind Settlebank and Choil Aluminum 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.