Correlation Between United States and Fluor

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

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

Diversification Opportunities for United States and Fluor

0.37

Correlation Coefficient

United States  Fluor

Weak diversification

The 3 months correlation between United and Fluor is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel and Fluor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fluor and United States 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 United States Steel are associated (or correlated) with Fluor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fluor has no effect on the direction of United States i.e., United States and Fluor go up and down completely randomly.

Pair Corralation between United States and Fluor

Given the investment horizon of 90 days United States Steel is expected to under-perform the Fluor. But the stock apears to be less risky and, when comparing its historical volatility, United States Steel is 1.3 times less risky than Fluor. The stock trades about -0.01 of its potential returns per unit of risk. The Fluor is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  65,599  in Fluor on September 30, 2024 and sell it today you would earn a total of  32,928  from holding Fluor or generate 50.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.2%
Values	Daily Returns

United States Steel  vs.  Fluor

United States Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days United States Steel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong primary indicators, United States is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Fluor

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fluor are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Fluor may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with United States and Fluor

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

The idea behind United States Steel and Fluor 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.