Correlation Between City Steel and Navakij Insurance

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

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

Diversification Opportunities for City Steel and Navakij Insurance

0.26

Correlation Coefficient

City Steel  Navakij Insurance

Modest diversification

The 3 months correlation between City and Navakij is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding City Steel Public and The Navakij Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Navakij Insurance and City 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 City Steel Public are associated (or correlated) with Navakij Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Navakij Insurance has no effect on the direction of City Steel i.e., City Steel and Navakij Insurance go up and down completely randomly.

Pair Corralation between City Steel and Navakij Insurance

Assuming the 90 days trading horizon City Steel Public is expected to under-perform the Navakij Insurance. In addition to that, City Steel is 1.85 times more volatile than The Navakij Insurance. It trades about -0.07 of its total potential returns per unit of risk. The Navakij Insurance is currently generating about 0.0 per unit of volatility. If you would invest  2,490  in The Navakij Insurance on September 15, 2024 and sell it today you would earn a total of  0.00  from holding The Navakij Insurance or generate 0.0% return on investment over 90 days.

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

City Steel Public  vs.  The Navakij Insurance

City Steel Public

Risk-Adjusted Performance

0 of 100

Very Weak

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

Navakij Insurance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Navakij Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward indicators, Navakij Insurance is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with City Steel and Navakij Insurance

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

The idea behind City Steel Public and The Navakij Insurance 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.