Correlation Between Steel Dynamics and BII Railway
Can any of the company-specific risk be diversified away by investing in both Steel Dynamics and BII Railway 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 BII Railway into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Dynamics and BII Railway Transportation, you can compare the effects of market volatilities on Steel Dynamics and BII Railway 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 BII Railway. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and BII Railway.
Diversification Opportunities for Steel Dynamics and BII Railway
0.19 | Correlation Coefficient |
Average diversification
The 3 months correlation between Steel and BII is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and BII Railway Transportation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BII Railway Transpor 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 BII Railway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BII Railway Transpor has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and BII Railway go up and down completely randomly.
Pair Corralation between Steel Dynamics and BII Railway
Assuming the 90 days horizon Steel Dynamics is expected to generate 1.72 times more return on investment than BII Railway. However, Steel Dynamics is 1.72 times more volatile than BII Railway Transportation. It trades about 0.18 of its potential returns per unit of risk. BII Railway Transportation is currently generating about -0.04 per unit of risk. If you would invest 12,166 in Steel Dynamics on September 5, 2024 and sell it today you would earn a total of 1,504 from holding Steel Dynamics or generate 12.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Steel Dynamics vs. BII Railway Transportation
Performance |
| Timeline |
| Steel Dynamics |
| BII Railway Transpor |
Steel Dynamics and BII Railway Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Steel Dynamics and BII Railway
The main advantage of trading using opposite Steel Dynamics and BII Railway positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics position performs unexpectedly, BII Railway 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 BII Railway will offset losses from the drop in BII Railway's long position.| Steel Dynamics vs. Perma Fix Environmental Services | Steel Dynamics vs. MITSUBISHI STEEL MFG | Steel Dynamics vs. MEDICAL FACILITIES NEW | Steel Dynamics vs. ONWARD MEDICAL BV |
| BII Railway vs. FUJITSU LTD ADR | BII Railway vs. Superior Plus Corp | BII Railway vs. NMI Holdings | BII Railway vs. Origin Agritech |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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