Correlation Between Bisalloy Steel and Butn

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

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

Diversification Opportunities for Bisalloy Steel and Butn

0.82

Correlation Coefficient

Bisalloy Steel  Butn

Very poor diversification

The 3 months correlation between Bisalloy and Butn is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Bisalloy Steel Group and Butn in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Butn and Bisalloy 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 Bisalloy Steel Group are associated (or correlated) with Butn. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Butn has no effect on the direction of Bisalloy Steel i.e., Bisalloy Steel and Butn go up and down completely randomly.

Pair Corralation between Bisalloy Steel and Butn

Assuming the 90 days trading horizon Bisalloy Steel is expected to generate 1.89 times less return on investment than Butn. In addition to that, Bisalloy Steel is 1.22 times more volatile than Butn. It trades about 0.05 of its total potential returns per unit of risk. Butn is currently generating about 0.11 per unit of volatility. If you would invest  4.60  in Butn on September 29, 2024 and sell it today you would earn a total of  2.40  from holding Butn or generate 52.17% return on investment over 90 days.

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

Bisalloy Steel Group  vs.  Butn

Bisalloy Steel Group

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bisalloy Steel Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Bisalloy Steel unveiled solid returns over the last few months and may actually be approaching a breakup point.

Butn

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Butn are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Butn unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bisalloy Steel and Butn

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

The idea behind Bisalloy Steel Group and Butn 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.