Correlation Between Steel Authority and ABM International

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

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

Diversification Opportunities for Steel Authority and ABM International

-0.72

Correlation Coefficient

Steel Authority  ABM International

Pay attention - limited upside

The 3 months correlation between Steel and ABM is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Steel Authority of and ABM International Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABM International and Steel Authority 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 Steel Authority of are associated (or correlated) with ABM International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABM International has no effect on the direction of Steel Authority i.e., Steel Authority and ABM International go up and down completely randomly.

Pair Corralation between Steel Authority and ABM International

Assuming the 90 days trading horizon Steel Authority of is expected to under-perform the ABM International. But the stock apears to be less risky and, when comparing its historical volatility, Steel Authority of is 1.73 times less risky than ABM International. The stock trades about -0.06 of its potential returns per unit of risk. The ABM International Limited is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  6,540  in ABM International Limited on September 3, 2024 and sell it today you would earn a total of  688.00  from holding ABM International Limited or generate 10.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.19%
Values	Daily Returns

Steel Authority of  vs.  ABM International Limited

Steel Authority

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Steel Authority of has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

ABM International

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ABM International Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady essential indicators, ABM International disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Steel Authority and ABM International

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

The idea behind Steel Authority of and ABM International 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.