Correlation Between Steel Dynamics and Applied Blockchain
Can any of the company-specific risk be diversified away by investing in both Steel Dynamics and Applied Blockchain 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 Applied Blockchain into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Dynamics and Applied Blockchain, you can compare the effects of market volatilities on Steel Dynamics and Applied Blockchain 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 Applied Blockchain. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and Applied Blockchain.
Diversification Opportunities for Steel Dynamics and Applied Blockchain
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Steel and Applied is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and Applied Blockchain in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Blockchain 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 Applied Blockchain. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Blockchain has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and Applied Blockchain go up and down completely randomly.
Pair Corralation between Steel Dynamics and Applied Blockchain
Given the investment horizon of 90 days Steel Dynamics is expected to generate 3.56 times less return on investment than Applied Blockchain. But when comparing it to its historical volatility, Steel Dynamics is 2.11 times less risky than Applied Blockchain. It trades about 0.12 of its potential returns per unit of risk. Applied Blockchain is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 736.00 in Applied Blockchain on August 31, 2024 and sell it today you would earn a total of 230.00 from holding Applied Blockchain or generate 31.25% 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. Applied Blockchain
Performance |
| Timeline |
| Steel Dynamics |
| Applied Blockchain |
Steel Dynamics and Applied Blockchain Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Steel Dynamics and Applied Blockchain
The main advantage of trading using opposite Steel Dynamics and Applied Blockchain positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics position performs unexpectedly, Applied Blockchain 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 Applied Blockchain will offset losses from the drop in Applied Blockchain'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 |
| Applied Blockchain vs. Magic Empire Global | Applied Blockchain vs. Zhong Yang Financial | Applied Blockchain vs. Netcapital | Applied Blockchain vs. Lazard |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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