Correlation Between Finebesteel and Welcron Company

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

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

Diversification Opportunities for Finebesteel and Welcron Company

0.84

Correlation Coefficient

Finebesteel  Welcron Company

Very poor diversification

The 3 months correlation between Finebesteel and Welcron is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Finebesteel and Welcron Company Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Welcron Limited and Finebesteel 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 Finebesteel are associated (or correlated) with Welcron Company. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Welcron Limited has no effect on the direction of Finebesteel i.e., Finebesteel and Welcron Company go up and down completely randomly.

Pair Corralation between Finebesteel and Welcron Company

Assuming the 90 days trading horizon Finebesteel is expected to under-perform the Welcron Company. But the stock apears to be less risky and, when comparing its historical volatility, Finebesteel is 1.12 times less risky than Welcron Company. The stock trades about -0.35 of its potential returns per unit of risk. The Welcron Company Limited is currently generating about -0.26 of returns per unit of risk over similar time horizon. If you would invest  273,500  in Welcron Company Limited on March 31, 2024 and sell it today you would lose (47,500) from holding Welcron Company Limited or give up 17.37% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	97.56%
Values	Daily Returns

Finebesteel  vs.  Welcron Company Limited

Finebesteel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Finebesteel has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in July 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Welcron Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Welcron Company Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in July 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Finebesteel and Welcron Company

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

The idea behind Finebesteel and Welcron Company 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.