Correlation Between Outokumpu Oyj and Steel Dynamics
Can any of the company-specific risk be diversified away by investing in both Outokumpu Oyj 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 Outokumpu Oyj and Steel Dynamics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Outokumpu Oyj ADR and Steel Dynamics, you can compare the effects of market volatilities on Outokumpu Oyj 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 Outokumpu Oyj with a short position of Steel Dynamics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Outokumpu Oyj and Steel Dynamics.
Diversification Opportunities for Outokumpu Oyj and Steel Dynamics
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Outokumpu and Steel is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Outokumpu Oyj ADR and Steel Dynamics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steel Dynamics and Outokumpu Oyj 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 Outokumpu Oyj ADR 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 Outokumpu Oyj i.e., Outokumpu Oyj and Steel Dynamics go up and down completely randomly.
Pair Corralation between Outokumpu Oyj and Steel Dynamics
Assuming the 90 days horizon Outokumpu Oyj ADR is expected to under-perform the Steel Dynamics. But the pink sheet apears to be less risky and, when comparing its historical volatility, Outokumpu Oyj ADR is 2.7 times less risky than Steel Dynamics. The pink sheet trades about -0.24 of its potential returns per unit of risk. The Steel Dynamics is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 12,864 in Steel Dynamics on August 24, 2024 and sell it today you would earn a total of 1,642 from holding Steel Dynamics or generate 12.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Outokumpu Oyj ADR vs. Steel Dynamics
Performance |
| Timeline |
| Outokumpu Oyj ADR |
| Steel Dynamics |
Outokumpu Oyj and Steel Dynamics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Outokumpu Oyj and Steel Dynamics
The main advantage of trading using opposite Outokumpu Oyj and Steel Dynamics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Outokumpu Oyj 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.| Outokumpu Oyj vs. Olympic Steel | Outokumpu Oyj vs. Mesabi Trust | Outokumpu Oyj vs. Universal Stainless Alloy | Outokumpu Oyj vs. POSCO Holdings |
| Steel Dynamics vs. Cleveland Cliffs | Steel Dynamics vs. United States Steel | Steel Dynamics vs. Reliance Steel Aluminum | Steel Dynamics vs. Nucor Corp |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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