Correlation Between Ferrexpo PLC and Steel Dynamics
Can any of the company-specific risk be diversified away by investing in both Ferrexpo PLC 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 Ferrexpo PLC and Steel Dynamics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ferrexpo PLC and Steel Dynamics, you can compare the effects of market volatilities on Ferrexpo PLC 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 Ferrexpo PLC with a short position of Steel Dynamics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ferrexpo PLC and Steel Dynamics.
Diversification Opportunities for Ferrexpo PLC and Steel Dynamics
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ferrexpo and Steel is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Ferrexpo PLC and Steel Dynamics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steel Dynamics and Ferrexpo PLC 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 Ferrexpo PLC 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 Ferrexpo PLC i.e., Ferrexpo PLC and Steel Dynamics go up and down completely randomly.
Pair Corralation between Ferrexpo PLC and Steel Dynamics
Assuming the 90 days horizon Ferrexpo PLC is expected to generate 2.7 times more return on investment than Steel Dynamics. However, Ferrexpo PLC is 2.7 times more volatile than Steel Dynamics. It trades about 0.03 of its potential returns per unit of risk. Steel Dynamics is currently generating about 0.06 per unit of risk. If you would invest 93.00 in Ferrexpo PLC on September 3, 2024 and sell it today you would earn a total of 2.00 from holding Ferrexpo PLC or generate 2.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.6% |
| Values | Daily Returns |
Ferrexpo PLC vs. Steel Dynamics
Performance |
| Timeline |
| Ferrexpo PLC |
| Steel Dynamics |
Ferrexpo PLC and Steel Dynamics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ferrexpo PLC and Steel Dynamics
The main advantage of trading using opposite Ferrexpo PLC and Steel Dynamics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ferrexpo PLC 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.| Ferrexpo PLC vs. ArcelorMittal SA | Ferrexpo PLC vs. Acerinox SA ADR | Ferrexpo PLC vs. Aperam PK | Ferrexpo PLC vs. Algoma Steel Group |
| 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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