Correlation Between Steel Authority and Mold Tek

Can any of the company-specific risk be diversified away by investing in both Steel Authority and Mold Tek 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 Mold Tek 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 Mold Tek Packaging Limited, you can compare the effects of market volatilities on Steel Authority and Mold Tek 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 Mold Tek. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Authority and Mold Tek.

Diversification Opportunities for Steel Authority and Mold Tek

0.76

Correlation Coefficient

Steel Authority  Mold Tek

Poor diversification

The 3 months correlation between Steel and Mold is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Steel Authority of and Mold Tek Packaging Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mold Tek Packaging 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 Mold Tek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mold Tek Packaging has no effect on the direction of Steel Authority i.e., Steel Authority and Mold Tek go up and down completely randomly.

Pair Corralation between Steel Authority and Mold Tek

Assuming the 90 days trading horizon Steel Authority of is expected to generate 1.3 times more return on investment than Mold Tek. However, Steel Authority is 1.3 times more volatile than Mold Tek Packaging Limited. It trades about 0.01 of its potential returns per unit of risk. Mold Tek Packaging Limited is currently generating about -0.11 per unit of risk. If you would invest  12,697  in Steel Authority of on September 11, 2024 and sell it today you would lose (84.00) from holding Steel Authority of or give up 0.66% of portfolio value over 90 days.

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

Steel Authority of  vs.  Mold Tek Packaging Limited

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.

Mold Tek Packaging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mold Tek Packaging Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest uncertain performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Steel Authority and Mold Tek

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

The idea behind Steel Authority of and Mold Tek Packaging Limited 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.