Correlation Between Steel Authority and Southern Petrochemicals

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Steel Authority and Southern Petrochemicals 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 Southern Petrochemicals 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 Southern Petrochemicals Industries, you can compare the effects of market volatilities on Steel Authority and Southern Petrochemicals 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 Southern Petrochemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Authority and Southern Petrochemicals.

Diversification Opportunities for Steel Authority and Southern Petrochemicals

0.82
  Correlation Coefficient

Very poor diversification

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

Pair Corralation between Steel Authority and Southern Petrochemicals

Assuming the 90 days trading horizon Steel Authority of is expected to generate 1.07 times more return on investment than Southern Petrochemicals. However, Steel Authority is 1.07 times more volatile than Southern Petrochemicals Industries. It trades about -0.07 of its potential returns per unit of risk. Southern Petrochemicals Industries is currently generating about -0.11 per unit of risk. If you would invest  12,968  in Steel Authority of on September 23, 2024 and sell it today you would lose (1,358) from holding Steel Authority of or give up 10.47% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy98.44%
ValuesDaily Returns

Steel Authority of  vs.  Southern Petrochemicals Indust

 Performance 
       Timeline  
Steel Authority 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.
Southern Petrochemicals 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Southern Petrochemicals Industries 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 January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Steel Authority and Southern Petrochemicals Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Steel Authority and Southern Petrochemicals

The main advantage of trading using opposite Steel Authority and Southern Petrochemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Authority position performs unexpectedly, Southern Petrochemicals 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 Southern Petrochemicals will offset losses from the drop in Southern Petrochemicals' long position.
The idea behind Steel Authority of and Southern Petrochemicals Industries 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.

Other Complementary Tools

Odds Of Bankruptcy
Get analysis of equity chance of financial distress in the next 2 years
Headlines Timeline
Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity
Sync Your Broker
Sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors.
Portfolio Analyzer
Portfolio analysis module that provides access to portfolio diagnostics and optimization engine
Commodity Channel
Use Commodity Channel Index to analyze current equity momentum