Correlation Between Fineotex Chemical and Steel Authority

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

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

Diversification Opportunities for Fineotex Chemical and Steel Authority

0.82

Correlation Coefficient

Fineotex Chemical  Steel Authority

Very poor diversification

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

Pair Corralation between Fineotex Chemical and Steel Authority

Assuming the 90 days trading horizon Fineotex Chemical Limited is expected to under-perform the Steel Authority. In addition to that, Fineotex Chemical is 1.12 times more volatile than Steel Authority of. It trades about -0.07 of its total potential returns per unit of risk. Steel Authority of is currently generating about -0.02 per unit of volatility. If you would invest  13,220  in Steel Authority of on September 13, 2024 and sell it today you would lose (525.00) from holding Steel Authority of or give up 3.97% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.39%
Values	Daily Returns

Fineotex Chemical Limited  vs.  Steel Authority of

Fineotex Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fineotex Chemical Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Steel Authority

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Steel Authority of has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Steel Authority is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Fineotex Chemical and Steel Authority

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

The idea behind Fineotex Chemical Limited and Steel Authority of 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.