Correlation Between STEEL DYNAMICS and Microsoft
Can any of the company-specific risk be diversified away by investing in both STEEL DYNAMICS and Microsoft 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 Microsoft into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between STEEL DYNAMICS and Microsoft, you can compare the effects of market volatilities on STEEL DYNAMICS and Microsoft 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 Microsoft. Check out your portfolio center. Please also check ongoing floating volatility patterns of STEEL DYNAMICS and Microsoft.
Diversification Opportunities for STEEL DYNAMICS and Microsoft
-0.08 | Correlation Coefficient |
Good diversification
The 3 months correlation between STEEL and Microsoft is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding STEEL DYNAMICS and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft 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 Microsoft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft has no effect on the direction of STEEL DYNAMICS i.e., STEEL DYNAMICS and Microsoft go up and down completely randomly.
Pair Corralation between STEEL DYNAMICS and Microsoft
Assuming the 90 days trading horizon STEEL DYNAMICS is expected to under-perform the Microsoft. In addition to that, STEEL DYNAMICS is 2.08 times more volatile than Microsoft. It trades about -0.34 of its total potential returns per unit of risk. Microsoft is currently generating about -0.16 per unit of volatility. If you would invest 42,255 in Microsoft on October 10, 2024 and sell it today you would lose (1,130) from holding Microsoft or give up 2.67% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
STEEL DYNAMICS vs. Microsoft
Performance |
| Timeline |
| STEEL DYNAMICS |
| Microsoft |
STEEL DYNAMICS and Microsoft Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with STEEL DYNAMICS and Microsoft
The main advantage of trading using opposite STEEL DYNAMICS and Microsoft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STEEL DYNAMICS position performs unexpectedly, Microsoft 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 Microsoft will offset losses from the drop in Microsoft's long position.| STEEL DYNAMICS vs. INDOFOOD AGRI RES | STEEL DYNAMICS vs. SOLSTAD OFFSHORE NK | STEEL DYNAMICS vs. Tyson Foods | STEEL DYNAMICS vs. SENECA FOODS A |
| Microsoft vs. Nanjing Panda Electronics | Microsoft vs. AEGEAN AIRLINES | Microsoft vs. Nok Airlines PCL | Microsoft vs. Gol Intelligent Airlines |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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