Correlation Between Steel Dynamics and Sims Metal
Can any of the company-specific risk be diversified away by investing in both Steel Dynamics and Sims Metal 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 Sims Metal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Dynamics and Sims Metal Management, you can compare the effects of market volatilities on Steel Dynamics and Sims Metal 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 Sims Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and Sims Metal.
Diversification Opportunities for Steel Dynamics and Sims Metal
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Steel and Sims is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and Sims Metal Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sims Metal Management 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 Sims Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sims Metal Management has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and Sims Metal go up and down completely randomly.
Pair Corralation between Steel Dynamics and Sims Metal
Assuming the 90 days horizon Steel Dynamics is expected to generate 1.77 times less return on investment than Sims Metal. In addition to that, Steel Dynamics is 1.03 times more volatile than Sims Metal Management. It trades about 0.05 of its total potential returns per unit of risk. Sims Metal Management is currently generating about 0.08 per unit of volatility. If you would invest 646.00 in Sims Metal Management on September 1, 2024 and sell it today you would earn a total of 154.00 from holding Sims Metal Management or generate 23.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.24% |
| Values | Daily Returns |
Steel Dynamics vs. Sims Metal Management
Performance |
| Timeline |
| Steel Dynamics |
| Sims Metal Management |
Steel Dynamics and Sims Metal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Steel Dynamics and Sims Metal
The main advantage of trading using opposite Steel Dynamics and Sims Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics position performs unexpectedly, Sims Metal 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 Sims Metal will offset losses from the drop in Sims Metal's long position.| Steel Dynamics vs. Aedas Homes SA | Steel Dynamics vs. MTI WIRELESS EDGE | Steel Dynamics vs. INVITATION HOMES DL | Steel Dynamics vs. LGI Homes |
| Sims Metal vs. Guidewire Software | Sims Metal vs. GREENX METALS LTD | Sims Metal vs. HK Electric Investments | Sims Metal vs. SEI INVESTMENTS |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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