Correlation Between Acerinox and Universal Stainless

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

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

Diversification Opportunities for Acerinox and Universal Stainless

-0.49

Correlation Coefficient

Acerinox  Universal Stainless

Very good diversification

The 3 months correlation between Acerinox and Universal is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Acerinox SA ADR and Universal Stainless Alloy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Stainless Alloy and Acerinox 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 Acerinox SA ADR are associated (or correlated) with Universal Stainless. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Stainless Alloy has no effect on the direction of Acerinox i.e., Acerinox and Universal Stainless go up and down completely randomly.

Pair Corralation between Acerinox and Universal Stainless

Assuming the 90 days horizon Acerinox is expected to generate 3.6 times less return on investment than Universal Stainless. In addition to that, Acerinox is 1.2 times more volatile than Universal Stainless Alloy. It trades about 0.04 of its total potential returns per unit of risk. Universal Stainless Alloy is currently generating about 0.15 per unit of volatility. If you would invest  3,693  in Universal Stainless Alloy on September 14, 2024 and sell it today you would earn a total of  717.00  from holding Universal Stainless Alloy or generate 19.42% return on investment over 90 days.

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

Acerinox SA ADR  vs.  Universal Stainless Alloy

Acerinox SA ADR

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Acerinox SA ADR are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Acerinox is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Universal Stainless Alloy

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Stainless Alloy are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, Universal Stainless reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Acerinox and Universal Stainless

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

The idea behind Acerinox SA ADR and Universal Stainless Alloy 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.