Correlation Between Steel Dynamics and Adcore
Can any of the company-specific risk be diversified away by investing in both Steel Dynamics and Adcore 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 Adcore into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Dynamics and Adcore Inc, you can compare the effects of market volatilities on Steel Dynamics and Adcore 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 Adcore. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and Adcore.
Diversification Opportunities for Steel Dynamics and Adcore
-0.49 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Steel and Adcore is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and Adcore Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adcore Inc 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 Adcore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adcore Inc has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and Adcore go up and down completely randomly.
Pair Corralation between Steel Dynamics and Adcore
Given the investment horizon of 90 days Steel Dynamics is expected to generate 2.26 times more return on investment than Adcore. However, Steel Dynamics is 2.26 times more volatile than Adcore Inc. It trades about 0.09 of its potential returns per unit of risk. Adcore Inc is currently generating about -0.21 per unit of risk. If you would invest 13,572 in Steel Dynamics on August 29, 2024 and sell it today you would earn a total of 791.00 from holding Steel Dynamics or generate 5.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Steel Dynamics vs. Adcore Inc
Performance |
| Timeline |
| Steel Dynamics |
| Adcore Inc |
Steel Dynamics and Adcore Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Steel Dynamics and Adcore
The main advantage of trading using opposite Steel Dynamics and Adcore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics position performs unexpectedly, Adcore 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 Adcore will offset losses from the drop in Adcore's long position.The idea behind Steel Dynamics and Adcore Inc 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.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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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