Correlation Between Steel Dynamics and Bank Rakyat
Can any of the company-specific risk be diversified away by investing in both Steel Dynamics and Bank Rakyat 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 Bank Rakyat into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Dynamics and Bank Rakyat, you can compare the effects of market volatilities on Steel Dynamics and Bank Rakyat 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 Bank Rakyat. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and Bank Rakyat.
Diversification Opportunities for Steel Dynamics and Bank Rakyat
-0.84 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Steel and Bank is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and Bank Rakyat in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Rakyat 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 Bank Rakyat. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Rakyat has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and Bank Rakyat go up and down completely randomly.
Pair Corralation between Steel Dynamics and Bank Rakyat
Given the investment horizon of 90 days Steel Dynamics is expected to generate 1.96 times more return on investment than Bank Rakyat. However, Steel Dynamics is 1.96 times more volatile than Bank Rakyat. It trades about 0.1 of its potential returns per unit of risk. Bank Rakyat is currently generating about -0.21 per unit of risk. If you would invest 13,516 in Steel Dynamics on August 30, 2024 and sell it today you would earn a total of 867.00 from holding Steel Dynamics or generate 6.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Steel Dynamics vs. Bank Rakyat
Performance |
| Timeline |
| Steel Dynamics |
| Bank Rakyat |
Steel Dynamics and Bank Rakyat Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Steel Dynamics and Bank Rakyat
The main advantage of trading using opposite Steel Dynamics and Bank Rakyat positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics position performs unexpectedly, Bank Rakyat 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 Bank Rakyat will offset losses from the drop in Bank Rakyat'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 |
| Bank Rakyat vs. Israel Discount Bank | Bank Rakyat vs. Danske Bank AS | Bank Rakyat vs. Absa Group Limited |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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