Correlation Between CSC Steel and SFP Tech

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

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

Diversification Opportunities for CSC Steel and SFP Tech

-0.21

Correlation Coefficient

CSC Steel  SFP Tech

Very good diversification

The 3 months correlation between CSC and SFP is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding CSC Steel Holdings and SFP Tech Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SFP Tech Holdings and CSC 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 CSC Steel Holdings are associated (or correlated) with SFP Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SFP Tech Holdings has no effect on the direction of CSC Steel i.e., CSC Steel and SFP Tech go up and down completely randomly.

Pair Corralation between CSC Steel and SFP Tech

Assuming the 90 days trading horizon CSC Steel is expected to generate 1.93 times less return on investment than SFP Tech. But when comparing it to its historical volatility, CSC Steel Holdings is 1.99 times less risky than SFP Tech. It trades about 0.02 of its potential returns per unit of risk. SFP Tech Holdings is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  65.00  in SFP Tech Holdings on September 26, 2024 and sell it today you would earn a total of  6.00  from holding SFP Tech Holdings or generate 9.23% return on investment over 90 days.

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

CSC Steel Holdings  vs.  SFP Tech Holdings

CSC Steel Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CSC Steel Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, CSC Steel is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

SFP Tech Holdings

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SFP Tech Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, SFP Tech may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with CSC Steel and SFP Tech

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

The idea behind CSC Steel Holdings and SFP Tech Holdings 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.