Correlation Between Steel Authority and State Trading

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

Diversification Opportunities for Steel Authority and State Trading

0.66

Correlation Coefficient

Steel Authority  State Trading

Poor diversification

The 3 months correlation between Steel and State is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Steel Authority of and The State Trading in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Trading 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 State Trading. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of State Trading has no effect on the direction of Steel Authority i.e., Steel Authority and State Trading go up and down completely randomly.

Pair Corralation between Steel Authority and State Trading

Assuming the 90 days trading horizon Steel Authority is expected to generate 1.21 times less return on investment than State Trading. But when comparing it to its historical volatility, Steel Authority of is 1.27 times less risky than State Trading. It trades about 0.05 of its potential returns per unit of risk. The State Trading is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  11,610  in The State Trading on September 23, 2024 and sell it today you would earn a total of  3,718  from holding The State Trading or generate 32.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.25%
Values	Daily Returns

Steel Authority of  vs.  The State Trading

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 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.

State Trading

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The State Trading has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Steel Authority and State Trading

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

The idea behind Steel Authority of and The State Trading 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.