Correlation Between Steel Dynamics and BARINGS LATIN

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Can any of the company-specific risk be diversified away by investing in both Steel Dynamics and BARINGS LATIN 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 BARINGS LATIN into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Dynamics and BARINGS LATIN AMERICA, you can compare the effects of market volatilities on Steel Dynamics and BARINGS LATIN 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 BARINGS LATIN. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and BARINGS LATIN.

Diversification Opportunities for Steel Dynamics and BARINGS LATIN

-0.41
  Correlation Coefficient

Very good diversification

The 3 months correlation between Steel and BARINGS is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and BARINGS LATIN AMERICA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BARINGS LATIN AMERICA 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 BARINGS LATIN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BARINGS LATIN AMERICA has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and BARINGS LATIN go up and down completely randomly.

Pair Corralation between Steel Dynamics and BARINGS LATIN

Given the investment horizon of 90 days Steel Dynamics is expected to generate 1.82 times more return on investment than BARINGS LATIN. However, Steel Dynamics is 1.82 times more volatile than BARINGS LATIN AMERICA. It trades about 0.04 of its potential returns per unit of risk. BARINGS LATIN AMERICA is currently generating about -0.09 per unit of risk. If you would invest  9,988  in Steel Dynamics on September 12, 2024 and sell it today you would earn a total of  3,448  from holding Steel Dynamics or generate 34.52% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy42.22%
ValuesDaily Returns

Steel Dynamics  vs.  BARINGS LATIN AMERICA

 Performance 
       Timeline  
Steel Dynamics 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Steel Dynamics are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile essential indicators, Steel Dynamics exhibited solid returns over the last few months and may actually be approaching a breakup point.
BARINGS LATIN AMERICA 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days BARINGS LATIN AMERICA has generated negative risk-adjusted returns adding no value to fund investors. In spite of rather sound technical and fundamental indicators, BARINGS LATIN is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Steel Dynamics and BARINGS LATIN Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Steel Dynamics and BARINGS LATIN

The main advantage of trading using opposite Steel Dynamics and BARINGS LATIN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics position performs unexpectedly, BARINGS LATIN 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 BARINGS LATIN will offset losses from the drop in BARINGS LATIN's long position.
The idea behind Steel Dynamics and BARINGS LATIN AMERICA 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.
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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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