Correlation Between Preferred Bank and STEEL DYNAMICS
Can any of the company-specific risk be diversified away by investing in both Preferred Bank and STEEL DYNAMICS 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 Preferred Bank and STEEL DYNAMICS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Preferred Bank and STEEL DYNAMICS, you can compare the effects of market volatilities on Preferred Bank and STEEL DYNAMICS 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 Preferred Bank with a short position of STEEL DYNAMICS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Preferred Bank and STEEL DYNAMICS.
Diversification Opportunities for Preferred Bank and STEEL DYNAMICS
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Preferred and STEEL is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Preferred Bank and STEEL DYNAMICS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STEEL DYNAMICS and Preferred Bank 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 Preferred Bank are associated (or correlated) with STEEL DYNAMICS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STEEL DYNAMICS has no effect on the direction of Preferred Bank i.e., Preferred Bank and STEEL DYNAMICS go up and down completely randomly.
Pair Corralation between Preferred Bank and STEEL DYNAMICS
Assuming the 90 days horizon Preferred Bank is expected to generate 1.03 times more return on investment than STEEL DYNAMICS. However, Preferred Bank is 1.03 times more volatile than STEEL DYNAMICS. It trades about 0.06 of its potential returns per unit of risk. STEEL DYNAMICS is currently generating about 0.01 per unit of risk. If you would invest 7,140 in Preferred Bank on November 3, 2024 and sell it today you would earn a total of 1,510 from holding Preferred Bank or generate 21.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Preferred Bank vs. STEEL DYNAMICS
Performance |
| Timeline |
| Preferred Bank |
| STEEL DYNAMICS |
Preferred Bank and STEEL DYNAMICS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Preferred Bank and STEEL DYNAMICS
The main advantage of trading using opposite Preferred Bank and STEEL DYNAMICS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Preferred Bank position performs unexpectedly, STEEL DYNAMICS 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 DYNAMICS will offset losses from the drop in STEEL DYNAMICS's long position.| Preferred Bank vs. POSBO UNSPADRS20YC1 | Preferred Bank vs. Postal Savings Bank | Preferred Bank vs. Oversea Chinese Banking | Preferred Bank vs. UNICREDIT SPA ADR |
| STEEL DYNAMICS vs. TAL Education Group | STEEL DYNAMICS vs. X FAB Silicon Foundries | STEEL DYNAMICS vs. Xinhua Winshare Publishing | STEEL DYNAMICS vs. Strategic Education |
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 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.
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