Correlation Between Intel and Steel Dynamics
Can any of the company-specific risk be diversified away by investing in both Intel 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 Intel and Steel Dynamics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Intel and Steel Dynamics, you can compare the effects of market volatilities on Intel 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 Intel with a short position of Steel Dynamics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Intel and Steel Dynamics.
Diversification Opportunities for Intel and Steel Dynamics
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Intel and Steel is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Intel and Steel Dynamics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steel Dynamics and Intel 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 Intel 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 Intel i.e., Intel and Steel Dynamics go up and down completely randomly.
Pair Corralation between Intel and Steel Dynamics
Assuming the 90 days trading horizon Intel is expected to generate 1.99 times less return on investment than Steel Dynamics. In addition to that, Intel is 1.06 times more volatile than Steel Dynamics. It trades about 0.09 of its total potential returns per unit of risk. Steel Dynamics is currently generating about 0.19 per unit of volatility. If you would invest 11,910 in Steel Dynamics on August 29, 2024 and sell it today you would earn a total of 1,792 from holding Steel Dynamics or generate 15.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Intel vs. Steel Dynamics
Performance |
| Timeline |
| Intel |
| Steel Dynamics |
Intel and Steel Dynamics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Intel and Steel Dynamics
The main advantage of trading using opposite Intel and Steel Dynamics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Intel 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.The idea behind Intel 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.| Steel Dynamics vs. Corsair Gaming | Steel Dynamics vs. Carsales | Steel Dynamics vs. DELTA AIR LINES | Steel Dynamics vs. Alaska Air Group |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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