Correlation Between Steel Dynamics and Plug Power
Can any of the company-specific risk be diversified away by investing in both Steel Dynamics and Plug Power 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 Plug Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Dynamics and Plug Power, you can compare the effects of market volatilities on Steel Dynamics and Plug Power 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 Plug Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and Plug Power.
Diversification Opportunities for Steel Dynamics and Plug Power
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Steel and Plug is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and Plug Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plug Power 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 Plug Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plug Power has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and Plug Power go up and down completely randomly.
Pair Corralation between Steel Dynamics and Plug Power
Given the investment horizon of 90 days Steel Dynamics is expected to under-perform the Plug Power. But the stock apears to be less risky and, when comparing its historical volatility, Steel Dynamics is 4.87 times less risky than Plug Power. The stock trades about -0.3 of its potential returns per unit of risk. The Plug Power is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 198.00 in Plug Power on September 12, 2024 and sell it today you would earn a total of 49.00 from holding Plug Power or generate 24.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Steel Dynamics vs. Plug Power
Performance |
| Timeline |
| Steel Dynamics |
| Plug Power |
Steel Dynamics and Plug Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Steel Dynamics and Plug Power
The main advantage of trading using opposite Steel Dynamics and Plug Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics position performs unexpectedly, Plug Power 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 Plug Power will offset losses from the drop in Plug Power's long position.| Steel Dynamics vs. Cleveland Cliffs | Steel Dynamics vs. United States Steel | Steel Dynamics vs. ArcelorMittal SA ADR | Steel Dynamics vs. Reliance Steel Aluminum |
| Plug Power vs. Hilton Food Group | Plug Power vs. Roebuck Food Group | Plug Power vs. GoldMining | Plug Power vs. Cornish Metals |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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