Correlation Between S4 Capital and Steel Connect

Can any of the company-specific risk be diversified away by investing in both S4 Capital and Steel Connect 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 S4 Capital and Steel Connect into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between S4 Capital plc and Steel Connect, you can compare the effects of market volatilities on S4 Capital and Steel Connect 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 S4 Capital with a short position of Steel Connect. Check out your portfolio center. Please also check ongoing floating volatility patterns of S4 Capital and Steel Connect.

Diversification Opportunities for S4 Capital and Steel Connect

0.27

Correlation Coefficient

S4 Capital  Steel Connect

Modest diversification

The 3 months correlation between SCPPF and Steel is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding S4 Capital plc and Steel Connect in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steel Connect and S4 Capital 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 S4 Capital plc are associated (or correlated) with Steel Connect. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Steel Connect has no effect on the direction of S4 Capital i.e., S4 Capital and Steel Connect go up and down completely randomly.

Pair Corralation between S4 Capital and Steel Connect

Assuming the 90 days horizon S4 Capital plc is expected to generate 1.78 times more return on investment than Steel Connect. However, S4 Capital is 1.78 times more volatile than Steel Connect. It trades about 0.02 of its potential returns per unit of risk. Steel Connect is currently generating about 0.01 per unit of risk. If you would invest  71.00  in S4 Capital plc on January 17, 2024 and sell it today you would lose (2.00) from holding S4 Capital plc or give up 2.82% of portfolio value over 90 days.

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

S4 Capital plc  vs.  Steel Connect

S4 Capital plc

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in S4 Capital plc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, S4 Capital reported solid returns over the last few months and may actually be approaching a breakup point.

Steel Connect

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Steel Connect are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain fundamental indicators, Steel Connect may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with S4 Capital and Steel Connect

The main advantage of trading using opposite S4 Capital and Steel Connect positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if S4 Capital position performs unexpectedly, Steel Connect 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 Connect will offset losses from the drop in Steel Connect's long position.

The idea behind S4 Capital plc and Steel Connect 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.