Correlation Between Bisalloy Steel and London City

Can any of the company-specific risk be diversified away by investing in both Bisalloy Steel and London City 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 London City 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 London City Equities, you can compare the effects of market volatilities on Bisalloy Steel and London City 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 London City. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bisalloy Steel and London City.

Diversification Opportunities for Bisalloy Steel and London City

0.76

Correlation Coefficient

Bisalloy Steel  London City

Poor diversification

The 3 months correlation between Bisalloy and London is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Bisalloy Steel Group and London City Equities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on London City Equities 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 London City. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of London City Equities has no effect on the direction of Bisalloy Steel i.e., Bisalloy Steel and London City go up and down completely randomly.

Pair Corralation between Bisalloy Steel and London City

Assuming the 90 days trading horizon Bisalloy Steel Group is expected to generate 5.65 times more return on investment than London City. However, Bisalloy Steel is 5.65 times more volatile than London City Equities. It trades about 0.13 of its potential returns per unit of risk. London City Equities is currently generating about 0.35 per unit of risk. If you would invest  335.00  in Bisalloy Steel Group on September 28, 2024 and sell it today you would earn a total of  108.00  from holding Bisalloy Steel Group or generate 32.24% return on investment over 90 days.

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

Bisalloy Steel Group  vs.  London City Equities

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.

London City Equities

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in London City Equities are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, London City unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bisalloy Steel and London City

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

The idea behind Bisalloy Steel Group and London City Equities 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.

Check out your portfolio center.

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..