Correlation Between United States and 191216CU2

Can any of the company-specific risk be diversified away by investing in both United States and 191216CU2 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 191216CU2 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 COCA COLA CO, you can compare the effects of market volatilities on United States and 191216CU2 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 191216CU2. Check out your portfolio center. Please also check ongoing floating volatility patterns of United States and 191216CU2.

Diversification Opportunities for United States and 191216CU2

0.57

Correlation Coefficient

United States  191216CU2

Very weak diversification

The 3 months correlation between United and 191216CU2 is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel and COCA COLA CO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COCA A CO 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 191216CU2. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COCA A CO has no effect on the direction of United States i.e., United States and 191216CU2 go up and down completely randomly.

Pair Corralation between United States and 191216CU2

Taking into account the 90-day investment horizon United States Steel is expected to under-perform the 191216CU2. In addition to that, United States is 4.39 times more volatile than COCA COLA CO. It trades about -0.27 of its total potential returns per unit of risk. COCA COLA CO is currently generating about -0.29 per unit of volatility. If you would invest  9,317  in COCA COLA CO on September 27, 2024 and sell it today you would lose (443.00) from holding COCA COLA CO or give up 4.75% of portfolio value over 90 days.

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

United States Steel  vs.  COCA COLA CO

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 latest unsteady performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

COCA A CO

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days COCA COLA CO has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 191216CU2 is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with United States and 191216CU2

The main advantage of trading using opposite United States and 191216CU2 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United States position performs unexpectedly, 191216CU2 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 191216CU2 will offset losses from the drop in 191216CU2's long position.

The idea behind United States Steel and COCA COLA CO 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.