Correlation Between Steel Dynamics and ArcelorMittal
Can any of the company-specific risk be diversified away by investing in both Steel Dynamics and ArcelorMittal 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 Steel Dynamics and ArcelorMittal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Dynamics and ArcelorMittal, you can compare the effects of market volatilities on Steel Dynamics and ArcelorMittal 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 Steel Dynamics with a short position of ArcelorMittal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and ArcelorMittal.
Diversification Opportunities for Steel Dynamics and ArcelorMittal
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Steel and ArcelorMittal is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and ArcelorMittal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ArcelorMittal and Steel Dynamics 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 Steel Dynamics are associated (or correlated) with ArcelorMittal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ArcelorMittal has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and ArcelorMittal go up and down completely randomly.
Pair Corralation between Steel Dynamics and ArcelorMittal
Assuming the 90 days horizon Steel Dynamics is expected to generate 1.47 times more return on investment than ArcelorMittal. However, Steel Dynamics is 1.47 times more volatile than ArcelorMittal. It trades about 0.22 of its potential returns per unit of risk. ArcelorMittal is currently generating about 0.17 per unit of risk. If you would invest 11,910 in Steel Dynamics on August 28, 2024 and sell it today you would earn a total of 1,956 from holding Steel Dynamics or generate 16.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Steel Dynamics vs. ArcelorMittal
Performance |
| Timeline |
| Steel Dynamics |
| ArcelorMittal |
Steel Dynamics and ArcelorMittal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Steel Dynamics and ArcelorMittal
The main advantage of trading using opposite Steel Dynamics and ArcelorMittal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics position performs unexpectedly, ArcelorMittal 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 ArcelorMittal will offset losses from the drop in ArcelorMittal's long position.| Steel Dynamics vs. DICKS Sporting Goods | Steel Dynamics vs. Ming Le Sports | Steel Dynamics vs. PARKEN Sport Entertainment | Steel Dynamics vs. Compagnie Plastic Omnium |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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