Correlation Between Steelcast and Choice International

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

By analyzing existing cross correlation between Steelcast Limited and Choice International Limited, you can compare the effects of market volatilities on Steelcast and Choice International 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 Steelcast with a short position of Choice International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steelcast and Choice International.

Diversification Opportunities for Steelcast and Choice International

0.6

Correlation Coefficient

Steelcast  Choice International

Poor diversification

The 3 months correlation between Steelcast and Choice is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Steelcast Limited and Choice International Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Choice International and Steelcast 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 Steelcast Limited are associated (or correlated) with Choice International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Choice International has no effect on the direction of Steelcast i.e., Steelcast and Choice International go up and down completely randomly.

Pair Corralation between Steelcast and Choice International

Assuming the 90 days trading horizon Steelcast is expected to generate 1.21 times less return on investment than Choice International. In addition to that, Steelcast is 1.39 times more volatile than Choice International Limited. It trades about 0.08 of its total potential returns per unit of risk. Choice International Limited is currently generating about 0.13 per unit of volatility. If you would invest  47,855  in Choice International Limited on October 1, 2024 and sell it today you would earn a total of  7,190  from holding Choice International Limited or generate 15.02% return on investment over 90 days.

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

Steelcast Limited  vs.  Choice International Limited

Steelcast Limited

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Steelcast Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain fundamental indicators, Steelcast sustained solid returns over the last few months and may actually be approaching a breakup point.

Choice International

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Choice International Limited are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady technical and fundamental indicators, Choice International demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Steelcast and Choice International

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

The idea behind Steelcast Limited and Choice International 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.