Correlation Between Matthews International and Steel Partners

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

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

Diversification Opportunities for Matthews International and Steel Partners

0.6

Correlation Coefficient

Matthews International  Steel Partners

Poor diversification

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

Pair Corralation between Matthews International and Steel Partners

Given the investment horizon of 90 days Matthews International is expected to under-perform the Steel Partners. In addition to that, Matthews International is 1.14 times more volatile than Steel Partners Holdings. It trades about -0.01 of its total potential returns per unit of risk. Steel Partners Holdings is currently generating about 0.01 per unit of volatility. If you would invest  4,425  in Steel Partners Holdings on September 25, 2024 and sell it today you would lose (208.00) from holding Steel Partners Holdings or give up 4.7% of portfolio value over 90 days.

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

Matthews International  vs.  Steel Partners Holdings

Matthews International

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Matthews International are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Matthews International showed solid returns over the last few months and may actually be approaching a breakup point.

Steel Partners Holdings

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Steel Partners Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable essential indicators, Steel Partners is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Matthews International and Steel Partners

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

The idea behind Matthews International and Steel Partners Holdings 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.