Correlation Between Steel Dynamics and FIBRA Storage

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Can any of the company-specific risk be diversified away by investing in both Steel Dynamics and FIBRA Storage 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 FIBRA Storage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Dynamics and FIBRA Storage, you can compare the effects of market volatilities on Steel Dynamics and FIBRA Storage 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 FIBRA Storage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and FIBRA Storage.

Diversification Opportunities for Steel Dynamics and FIBRA Storage

0.64
  Correlation Coefficient

Poor diversification

The 3 months correlation between Steel and FIBRA is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and FIBRA Storage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FIBRA Storage 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 FIBRA Storage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FIBRA Storage has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and FIBRA Storage go up and down completely randomly.

Pair Corralation between Steel Dynamics and FIBRA Storage

Assuming the 90 days trading horizon Steel Dynamics is expected to under-perform the FIBRA Storage. In addition to that, Steel Dynamics is 3.9 times more volatile than FIBRA Storage. It trades about -0.22 of its total potential returns per unit of risk. FIBRA Storage is currently generating about 0.06 per unit of volatility. If you would invest  1,784  in FIBRA Storage on October 21, 2024 and sell it today you would earn a total of  16.00  from holding FIBRA Storage or generate 0.9% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Steel Dynamics  vs.  FIBRA Storage

 Performance 
       Timeline  
Steel Dynamics 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Steel Dynamics are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Steel Dynamics showed solid returns over the last few months and may actually be approaching a breakup point.
FIBRA Storage 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in FIBRA Storage are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, FIBRA Storage is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Steel Dynamics and FIBRA Storage Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Steel Dynamics and FIBRA Storage

The main advantage of trading using opposite Steel Dynamics and FIBRA Storage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics position performs unexpectedly, FIBRA Storage 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 FIBRA Storage will offset losses from the drop in FIBRA Storage's long position.
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The idea behind Steel Dynamics and FIBRA Storage pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.

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