Correlation Between Steel Dynamics and Alligator Energy
Can any of the company-specific risk be diversified away by investing in both Steel Dynamics and Alligator Energy 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 Alligator Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Dynamics and Alligator Energy Limited, you can compare the effects of market volatilities on Steel Dynamics and Alligator Energy 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 Alligator Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and Alligator Energy.
Diversification Opportunities for Steel Dynamics and Alligator Energy
-0.53 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Steel and Alligator is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and Alligator Energy Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alligator Energy 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 Alligator Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alligator Energy has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and Alligator Energy go up and down completely randomly.
Pair Corralation between Steel Dynamics and Alligator Energy
Given the investment horizon of 90 days Steel Dynamics is expected to generate 14.22 times less return on investment than Alligator Energy. But when comparing it to its historical volatility, Steel Dynamics is 7.18 times less risky than Alligator Energy. It trades about 0.04 of its potential returns per unit of risk. Alligator Energy Limited is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 2.10 in Alligator Energy Limited on August 29, 2024 and sell it today you would earn a total of 0.40 from holding Alligator Energy Limited or generate 19.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Steel Dynamics vs. Alligator Energy Limited
Performance |
| Timeline |
| Steel Dynamics |
| Alligator Energy |
Steel Dynamics and Alligator Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Steel Dynamics and Alligator Energy
The main advantage of trading using opposite Steel Dynamics and Alligator Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics position performs unexpectedly, Alligator Energy 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 Alligator Energy will offset losses from the drop in Alligator Energy'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 |
| Alligator Energy vs. Aura Energy Limited | Alligator Energy vs. Appia Energy Corp | Alligator Energy vs. Purepoint Uranium Group | Alligator Energy vs. Peninsula Energy |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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