Correlation Between MSP Steel and Hilton Metal

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

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

Diversification Opportunities for MSP Steel and Hilton Metal

0.19

Correlation Coefficient

MSP Steel  Hilton Metal

Average diversification

The 3 months correlation between MSP and Hilton is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding MSP Steel Power and Hilton Metal Forging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hilton Metal Forging and MSP 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 MSP Steel Power are associated (or correlated) with Hilton Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hilton Metal Forging has no effect on the direction of MSP Steel i.e., MSP Steel and Hilton Metal go up and down completely randomly.

Pair Corralation between MSP Steel and Hilton Metal

Assuming the 90 days trading horizon MSP Steel Power is expected to generate 0.91 times more return on investment than Hilton Metal. However, MSP Steel Power is 1.1 times less risky than Hilton Metal. It trades about 0.15 of its potential returns per unit of risk. Hilton Metal Forging is currently generating about -0.03 per unit of risk. If you would invest  1,310  in MSP Steel Power on September 12, 2024 and sell it today you would earn a total of  3,354  from holding MSP Steel Power or generate 256.03% return on investment over 90 days.

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

MSP Steel Power  vs.  Hilton Metal Forging

MSP Steel Power

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MSP Steel Power are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, MSP Steel may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Hilton Metal Forging

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hilton Metal Forging are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Hilton Metal is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with MSP Steel and Hilton Metal

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

The idea behind MSP Steel Power and Hilton Metal Forging 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.