Correlation Between Dupont De and Steel Dynamics
Can any of the company-specific risk be diversified away by investing in both Dupont De 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 Dupont De and Steel Dynamics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dupont De Nemours and Steel Dynamics, you can compare the effects of market volatilities on Dupont De 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 Dupont De with a short position of Steel Dynamics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dupont De and Steel Dynamics.
Diversification Opportunities for Dupont De and Steel Dynamics
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Dupont and Steel is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Dupont De Nemours and Steel Dynamics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steel Dynamics and Dupont De 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 Dupont De Nemours 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 Dupont De i.e., Dupont De and Steel Dynamics go up and down completely randomly.
Pair Corralation between Dupont De and Steel Dynamics
Allowing for the 90-day total investment horizon Dupont De is expected to generate 2.56 times less return on investment than Steel Dynamics. But when comparing it to its historical volatility, Dupont De Nemours is 1.72 times less risky than Steel Dynamics. It trades about 0.19 of its potential returns per unit of risk. Steel Dynamics is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 11,648 in Steel Dynamics on November 9, 2024 and sell it today you would earn a total of 1,248 from holding Steel Dynamics or generate 10.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dupont De Nemours vs. Steel Dynamics
Performance |
| Timeline |
| Dupont De Nemours |
| Steel Dynamics |
Dupont De and Steel Dynamics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dupont De and Steel Dynamics
The main advantage of trading using opposite Dupont De and Steel Dynamics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dupont De 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' long position.| Dupont De vs. Eastman Chemical | Dupont De vs. Olin Corporation | Dupont De vs. Cabot | Dupont De vs. Kronos Worldwide |
| Steel Dynamics vs. Cleveland Cliffs | Steel Dynamics vs. United States Steel | Steel Dynamics vs. ArcelorMittal SA ADR | Steel Dynamics vs. Reliance Steel Aluminum |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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