Correlation Between Hilton Metal and Steel Authority

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

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

Diversification Opportunities for Hilton Metal and Steel Authority

0.03

Correlation Coefficient

Hilton Metal  Steel Authority

Significant diversification

The 3 months correlation between Hilton and Steel is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Hilton Metal Forging and Steel Authority of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steel Authority and Hilton Metal 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 Hilton Metal Forging 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 Hilton Metal i.e., Hilton Metal and Steel Authority go up and down completely randomly.

Pair Corralation between Hilton Metal and Steel Authority

Assuming the 90 days trading horizon Hilton Metal Forging is expected to generate 1.76 times more return on investment than Steel Authority. However, Hilton Metal is 1.76 times more volatile than Steel Authority of. It trades about 0.32 of its potential returns per unit of risk. Steel Authority of is currently generating about 0.06 per unit of risk. If you would invest  8,173  in Hilton Metal Forging on September 24, 2024 and sell it today you would earn a total of  1,577  from holding Hilton Metal Forging or generate 19.3% return on investment over 90 days.

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

Hilton Metal Forging  vs.  Steel Authority of

Hilton Metal Forging

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hilton Metal Forging are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent basic indicators, Hilton Metal sustained solid returns over the last few months and may actually be approaching a breakup point.

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 weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Hilton Metal and Steel Authority

The main advantage of trading using opposite Hilton Metal and Steel Authority positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hilton Metal 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 Hilton Metal Forging 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.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.