Correlation Between Steel Dynamics and Bitcoin Well
Can any of the company-specific risk be diversified away by investing in both Steel Dynamics and Bitcoin Well 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 Bitcoin Well into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Dynamics and Bitcoin Well, you can compare the effects of market volatilities on Steel Dynamics and Bitcoin Well 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 Bitcoin Well. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and Bitcoin Well.
Diversification Opportunities for Steel Dynamics and Bitcoin Well
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Steel and Bitcoin is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and Bitcoin Well in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bitcoin Well 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 Bitcoin Well. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bitcoin Well has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and Bitcoin Well go up and down completely randomly.
Pair Corralation between Steel Dynamics and Bitcoin Well
Given the investment horizon of 90 days Steel Dynamics is expected to generate 16.16 times less return on investment than Bitcoin Well. But when comparing it to its historical volatility, Steel Dynamics is 7.28 times less risky than Bitcoin Well. It trades about 0.05 of its potential returns per unit of risk. Bitcoin Well is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 2.24 in Bitcoin Well on August 29, 2024 and sell it today you would earn a total of 10.76 from holding Bitcoin Well or generate 480.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.6% |
| Values | Daily Returns |
Steel Dynamics vs. Bitcoin Well
Performance |
| Timeline |
| Steel Dynamics |
| Bitcoin Well |
Steel Dynamics and Bitcoin Well Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Steel Dynamics and Bitcoin Well
The main advantage of trading using opposite Steel Dynamics and Bitcoin Well positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics position performs unexpectedly, Bitcoin Well 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 Bitcoin Well will offset losses from the drop in Bitcoin Well's long position.The idea behind Steel Dynamics and Bitcoin Well 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.| Bitcoin Well vs. SPENN Technology AS | Bitcoin Well vs. Arcane Crypto AB | Bitcoin Well vs. OFX Group Ltd | Bitcoin Well vs. Blockmate Ventures |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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