Correlation Between Team and Steel Connect

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

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

Diversification Opportunities for Team and Steel Connect

-0.36

Correlation Coefficient

Team  Steel Connect

Very good diversification

The 3 months correlation between Team and Steel is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Team Inc and Steel Connect in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steel Connect and Team 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 Team Inc are associated (or correlated) with Steel Connect. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Steel Connect has no effect on the direction of Team i.e., Team and Steel Connect go up and down completely randomly.

Pair Corralation between Team and Steel Connect

Given the investment horizon of 90 days Team Inc is expected to under-perform the Steel Connect. In addition to that, Team is 1.59 times more volatile than Steel Connect. It trades about -0.13 of its total potential returns per unit of risk. Steel Connect is currently generating about 0.17 per unit of volatility. If you would invest  1,029  in Steel Connect on September 12, 2024 and sell it today you would earn a total of  195.00  from holding Steel Connect or generate 18.95% return on investment over 90 days.

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

Team Inc  vs.  Steel Connect

Team Inc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Team Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Team may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Steel Connect

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Steel Connect are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain fundamental indicators, Steel Connect may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Team and Steel Connect

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

The idea behind Team Inc and Steel Connect 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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.