Correlation Between Steel Dynamics and Bayerische Motoren
Can any of the company-specific risk be diversified away by investing in both Steel Dynamics and Bayerische Motoren 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 Bayerische Motoren into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Dynamics and Bayerische Motoren Werke, you can compare the effects of market volatilities on Steel Dynamics and Bayerische Motoren 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 Bayerische Motoren. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and Bayerische Motoren.
Diversification Opportunities for Steel Dynamics and Bayerische Motoren
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Steel and Bayerische is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and Bayerische Motoren Werke in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bayerische Motoren Werke 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 Bayerische Motoren. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bayerische Motoren Werke has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and Bayerische Motoren go up and down completely randomly.
Pair Corralation between Steel Dynamics and Bayerische Motoren
Given the investment horizon of 90 days Steel Dynamics is expected to generate 0.8 times more return on investment than Bayerische Motoren. However, Steel Dynamics is 1.25 times less risky than Bayerische Motoren. It trades about 0.07 of its potential returns per unit of risk. Bayerische Motoren Werke is currently generating about -0.03 per unit of risk. If you would invest 10,314 in Steel Dynamics on August 25, 2024 and sell it today you would earn a total of 4,043 from holding Steel Dynamics or generate 39.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 73.06% |
| Values | Daily Returns |
Steel Dynamics vs. Bayerische Motoren Werke
Performance |
| Timeline |
| Steel Dynamics |
| Bayerische Motoren Werke |
Steel Dynamics and Bayerische Motoren Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Steel Dynamics and Bayerische Motoren
The main advantage of trading using opposite Steel Dynamics and Bayerische Motoren positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics position performs unexpectedly, Bayerische Motoren 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 Bayerische Motoren will offset losses from the drop in Bayerische Motoren's long position.| Steel Dynamics vs. Fortitude Gold Corp | Steel Dynamics vs. New Gold | Steel Dynamics vs. Galiano Gold | Steel Dynamics vs. GoldMining |
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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 CEOs Directory module to screen CEOs from public companies around the world.
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