Correlation Between Chemours and United States

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Can any of the company-specific risk be diversified away by investing in both Chemours and United States 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 Chemours and United States into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chemours Co and United States Steel, you can compare the effects of market volatilities on Chemours and United States 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 Chemours with a short position of United States. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chemours and United States.

Diversification Opportunities for Chemours and United States

0.33
  Correlation Coefficient

Weak diversification

The 3 months correlation between Chemours and United is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Chemours Co and United States Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United States Steel and Chemours 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 Chemours Co are associated (or correlated) with United States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United States Steel has no effect on the direction of Chemours i.e., Chemours and United States go up and down completely randomly.

Pair Corralation between Chemours and United States

Allowing for the 90-day total investment horizon Chemours Co is expected to under-perform the United States. In addition to that, Chemours is 9.97 times more volatile than United States Steel. It trades about -0.19 of its total potential returns per unit of risk. United States Steel is currently generating about 0.11 per unit of volatility. If you would invest  4,658  in United States Steel on December 3, 2023 and sell it today you would earn a total of  82.00  from holding United States Steel or generate 1.76% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Chemours Co  vs.  United States Steel

 Performance 
       Timeline  
Chemours 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Chemours Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in April 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.
United States Steel 

Risk-Adjusted Performance

10 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in United States Steel are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, United States showed solid returns over the last few months and may actually be approaching a breakup point.

Chemours and United States Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Chemours and United States

The main advantage of trading using opposite Chemours and United States positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chemours position performs unexpectedly, United States 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 United States will offset losses from the drop in United States' long position.
The idea behind Chemours Co and United States Steel 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.

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