Correlation Between STEEL DYNAMICS and ETFS Coffee
Can any of the company-specific risk be diversified away by investing in both STEEL DYNAMICS and ETFS Coffee 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 ETFS Coffee into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between STEEL DYNAMICS and ETFS Coffee ETC, you can compare the effects of market volatilities on STEEL DYNAMICS and ETFS Coffee 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 ETFS Coffee. Check out your portfolio center. Please also check ongoing floating volatility patterns of STEEL DYNAMICS and ETFS Coffee.
Diversification Opportunities for STEEL DYNAMICS and ETFS Coffee
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between STEEL and ETFS is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding STEEL DYNAMICS and ETFS Coffee ETC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETFS Coffee ETC 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 ETFS Coffee. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETFS Coffee ETC has no effect on the direction of STEEL DYNAMICS i.e., STEEL DYNAMICS and ETFS Coffee go up and down completely randomly.
Pair Corralation between STEEL DYNAMICS and ETFS Coffee
Assuming the 90 days trading horizon STEEL DYNAMICS is expected to under-perform the ETFS Coffee. But the stock apears to be less risky and, when comparing its historical volatility, STEEL DYNAMICS is 1.33 times less risky than ETFS Coffee. The stock trades about -0.04 of its potential returns per unit of risk. The ETFS Coffee ETC is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 3,861 in ETFS Coffee ETC on October 26, 2024 and sell it today you would earn a total of 1,803 from holding ETFS Coffee ETC or generate 46.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 96.61% |
| Values | Daily Returns |
STEEL DYNAMICS vs. ETFS Coffee ETC
Performance |
| Timeline |
| STEEL DYNAMICS |
| ETFS Coffee ETC |
STEEL DYNAMICS and ETFS Coffee Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with STEEL DYNAMICS and ETFS Coffee
The main advantage of trading using opposite STEEL DYNAMICS and ETFS Coffee positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STEEL DYNAMICS position performs unexpectedly, ETFS Coffee 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 ETFS Coffee will offset losses from the drop in ETFS Coffee's long position.| STEEL DYNAMICS vs. ETFS Coffee ETC | STEEL DYNAMICS vs. Broadridge Financial Solutions | STEEL DYNAMICS vs. BII Railway Transportation | STEEL DYNAMICS vs. Texas Roadhouse |
| ETFS Coffee vs. Vulcan Materials | ETFS Coffee vs. T MOBILE US | ETFS Coffee vs. Summit Materials | ETFS Coffee vs. The Yokohama Rubber |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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