Correlation Between Ethereum and STEEL DYNAMICS

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

Diversification Opportunities for Ethereum and STEEL DYNAMICS

0.34
  Correlation Coefficient

Weak diversification

The 3 months correlation between Ethereum and STEEL is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Ethereum and STEEL DYNAMICS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STEEL DYNAMICS and Ethereum 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 Ethereum 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 Ethereum i.e., Ethereum and STEEL DYNAMICS go up and down completely randomly.

Pair Corralation between Ethereum and STEEL DYNAMICS

Assuming the 90 days trading horizon Ethereum is expected to under-perform the STEEL DYNAMICS. In addition to that, Ethereum is 1.81 times more volatile than STEEL DYNAMICS. It trades about -0.16 of its total potential returns per unit of risk. STEEL DYNAMICS is currently generating about -0.29 per unit of volatility. If you would invest  12,734  in STEEL DYNAMICS on October 11, 2024 and sell it today you would lose (1,202) from holding STEEL DYNAMICS or give up 9.44% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy77.27%
ValuesDaily Returns

Ethereum  vs.  STEEL DYNAMICS

 Performance 
       Timeline  
Ethereum 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Ethereum are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical indicators, Ethereum exhibited solid returns over the last few months and may actually be approaching a breakup point.
STEEL DYNAMICS 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days STEEL DYNAMICS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, STEEL DYNAMICS is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Ethereum and STEEL DYNAMICS Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Ethereum and STEEL DYNAMICS

The main advantage of trading using opposite Ethereum and STEEL DYNAMICS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ethereum 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.
The idea behind Ethereum and STEEL DYNAMICS 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.

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