Correlation Between Leader Steel and YX Precious

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

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

Diversification Opportunities for Leader Steel and YX Precious

0.62

Correlation Coefficient

Leader Steel  YX Precious

Poor diversification

The 3 months correlation between Leader and 0250 is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Leader Steel Holdings and YX Precious Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on YX Precious Metals and Leader 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 Leader Steel Holdings are associated (or correlated) with YX Precious. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of YX Precious Metals has no effect on the direction of Leader Steel i.e., Leader Steel and YX Precious go up and down completely randomly.

Pair Corralation between Leader Steel and YX Precious

Assuming the 90 days trading horizon Leader Steel Holdings is expected to generate 1.26 times more return on investment than YX Precious. However, Leader Steel is 1.26 times more volatile than YX Precious Metals. It trades about -0.06 of its potential returns per unit of risk. YX Precious Metals is currently generating about -0.08 per unit of risk. If you would invest  46.00  in Leader Steel Holdings on September 28, 2024 and sell it today you would lose (5.00) from holding Leader Steel Holdings or give up 10.87% of portfolio value over 90 days.

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

Leader Steel Holdings  vs.  YX Precious Metals

Leader Steel Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Leader Steel Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

YX Precious Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days YX Precious Metals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Leader Steel and YX Precious

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

The idea behind Leader Steel Holdings and YX Precious Metals 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.