Correlation Between Steel Authority and Chemcon Speciality

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

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

Diversification Opportunities for Steel Authority and Chemcon Speciality

0.81

Correlation Coefficient

Steel Authority  Chemcon Speciality

Very poor diversification

The 3 months correlation between Steel and Chemcon is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Steel Authority of and Chemcon Speciality Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chemcon Speciality and Steel Authority 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 Steel Authority of are associated (or correlated) with Chemcon Speciality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chemcon Speciality has no effect on the direction of Steel Authority i.e., Steel Authority and Chemcon Speciality go up and down completely randomly.

Pair Corralation between Steel Authority and Chemcon Speciality

Assuming the 90 days trading horizon Steel Authority of is expected to under-perform the Chemcon Speciality. In addition to that, Steel Authority is 1.17 times more volatile than Chemcon Speciality Chemicals. It trades about -0.1 of its total potential returns per unit of risk. Chemcon Speciality Chemicals is currently generating about -0.1 per unit of volatility. If you would invest  26,700  in Chemcon Speciality Chemicals on August 30, 2024 and sell it today you would lose (3,170) from holding Chemcon Speciality Chemicals or give up 11.87% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.41%
Values	Daily Returns

Steel Authority of  vs.  Chemcon Speciality Chemicals

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 uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in December 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Chemcon Speciality

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chemcon Speciality Chemicals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Steel Authority and Chemcon Speciality

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

The idea behind Steel Authority of and Chemcon Speciality Chemicals 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.