Correlation Between Steel Dynamics and Accor SA
Can any of the company-specific risk be diversified away by investing in both Steel Dynamics and Accor SA 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 Accor SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Dynamics and Accor SA, you can compare the effects of market volatilities on Steel Dynamics and Accor SA 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 Accor SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and Accor SA.
Diversification Opportunities for Steel Dynamics and Accor SA
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Steel and Accor is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and Accor SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Accor SA 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 Accor SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Accor SA has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and Accor SA go up and down completely randomly.
Pair Corralation between Steel Dynamics and Accor SA
Given the investment horizon of 90 days Steel Dynamics is expected to generate 2.12 times more return on investment than Accor SA. However, Steel Dynamics is 2.12 times more volatile than Accor SA. It trades about 0.16 of its potential returns per unit of risk. Accor SA is currently generating about 0.08 per unit of risk. If you would invest 11,354 in Steel Dynamics on August 31, 2024 and sell it today you would earn a total of 3,029 from holding Steel Dynamics or generate 26.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Steel Dynamics vs. Accor SA
Performance |
| Timeline |
| Steel Dynamics |
| Accor SA |
Steel Dynamics and Accor SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Steel Dynamics and Accor SA
The main advantage of trading using opposite Steel Dynamics and Accor SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics position performs unexpectedly, Accor SA 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 Accor SA will offset losses from the drop in Accor SA'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 |
| Accor SA vs. Hilton Worldwide Holdings | Accor SA vs. InterContinental Hotels Group | Accor SA vs. Marriott International | Accor SA vs. Choice Hotels International |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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