Correlation Between AMREP and Steel Connect

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

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

Diversification Opportunities for AMREP and Steel Connect

-0.4

Correlation Coefficient

AMREP  Steel Connect

Very good diversification

The 3 months correlation between AMREP and Steel is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding AMREP and Steel Connect in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steel Connect and AMREP 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 AMREP are associated (or correlated) with Steel Connect. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Steel Connect has no effect on the direction of AMREP i.e., AMREP and Steel Connect go up and down completely randomly.

Pair Corralation between AMREP and Steel Connect

Considering the 90-day investment horizon AMREP is expected to generate 1.08 times more return on investment than Steel Connect. However, AMREP is 1.08 times more volatile than Steel Connect. It trades about 0.09 of its potential returns per unit of risk. Steel Connect is currently generating about 0.04 per unit of risk. If you would invest  2,030  in AMREP on September 4, 2024 and sell it today you would earn a total of  1,670  from holding AMREP or generate 82.27% return on investment over 90 days.

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

AMREP  vs.  Steel Connect

AMREP

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AMREP are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, AMREP reported solid returns over the last few months and may actually be approaching a breakup point.

Steel Connect

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Steel Connect are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain fundamental indicators, Steel Connect displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AMREP and Steel Connect

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

The idea behind AMREP and Steel Connect 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.