Correlation Between Steel Dynamics and China Resources
Can any of the company-specific risk be diversified away by investing in both Steel Dynamics and China Resources 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 China Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Dynamics and China Resources Cement, you can compare the effects of market volatilities on Steel Dynamics and China Resources 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 China Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and China Resources.
Diversification Opportunities for Steel Dynamics and China Resources
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Steel and China is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and China Resources Cement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Resources Cement 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 China Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Resources Cement has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and China Resources go up and down completely randomly.
Pair Corralation between Steel Dynamics and China Resources
If you would invest 13,358 in Steel Dynamics on September 4, 2024 and sell it today you would earn a total of 1,123 from holding Steel Dynamics or generate 8.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
Steel Dynamics vs. China Resources Cement
Performance |
| Timeline |
| Steel Dynamics |
| China Resources Cement |
Steel Dynamics and China Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Steel Dynamics and China Resources
The main advantage of trading using opposite Steel Dynamics and China Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics position performs unexpectedly, China Resources 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 China Resources will offset losses from the drop in China Resources' 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 |
| China Resources vs. Cementos Pacasmayo SAA | China Resources vs. Summit Materials | China Resources vs. Eagle Materials | China Resources vs. CRH PLC ADR |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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