Correlation Between Steel Dynamics and Leverage Shares
Can any of the company-specific risk be diversified away by investing in both Steel Dynamics and Leverage Shares 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 Leverage Shares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Dynamics and Leverage Shares 3x, you can compare the effects of market volatilities on Steel Dynamics and Leverage Shares 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 Leverage Shares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and Leverage Shares.
Diversification Opportunities for Steel Dynamics and Leverage Shares
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Steel and Leverage is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and Leverage Shares 3x in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leverage Shares 3x 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 Leverage Shares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leverage Shares 3x has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and Leverage Shares go up and down completely randomly.
Pair Corralation between Steel Dynamics and Leverage Shares
Given the investment horizon of 90 days Steel Dynamics is expected to generate 17.19 times less return on investment than Leverage Shares. But when comparing it to its historical volatility, Steel Dynamics is 5.08 times less risky than Leverage Shares. It trades about 0.13 of its potential returns per unit of risk. Leverage Shares 3x is currently generating about 0.43 of returns per unit of risk over similar time horizon. If you would invest 12,874 in Leverage Shares 3x on September 4, 2024 and sell it today you would earn a total of 34,054 from holding Leverage Shares 3x or generate 264.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Steel Dynamics vs. Leverage Shares 3x
Performance |
| Timeline |
| Steel Dynamics |
| Leverage Shares 3x |
Steel Dynamics and Leverage Shares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Steel Dynamics and Leverage Shares
The main advantage of trading using opposite Steel Dynamics and Leverage Shares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics position performs unexpectedly, Leverage Shares 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 Leverage Shares will offset losses from the drop in Leverage Shares' 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 |
| Leverage Shares vs. Vanguard SP 500 | Leverage Shares vs. SPDR Dow Jones | Leverage Shares vs. iShares Core MSCI | Leverage Shares vs. iShares SP 500 |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
Other Complementary Tools
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios | |
| CEOs Directory Screen CEOs from public companies around the world | |
| Portfolio File Import Quickly import all of your third-party portfolios from your local drive in csv format | |
| Portfolio Anywhere Track or share privately all of your investments from the convenience of any device | |
| Bonds Directory Find actively traded corporate debentures issued by US companies |