Correlation Between Steel Dynamics and Chilwa Minerals
Can any of the company-specific risk be diversified away by investing in both Steel Dynamics and Chilwa Minerals 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 Chilwa Minerals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Dynamics and Chilwa Minerals Limited, you can compare the effects of market volatilities on Steel Dynamics and Chilwa Minerals 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 Chilwa Minerals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and Chilwa Minerals.
Diversification Opportunities for Steel Dynamics and Chilwa Minerals
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Steel and Chilwa is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and Chilwa Minerals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chilwa Minerals 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 Chilwa Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chilwa Minerals has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and Chilwa Minerals go up and down completely randomly.
Pair Corralation between Steel Dynamics and Chilwa Minerals
Given the investment horizon of 90 days Steel Dynamics is expected to generate 1.18 times more return on investment than Chilwa Minerals. However, Steel Dynamics is 1.18 times more volatile than Chilwa Minerals Limited. It trades about 0.09 of its potential returns per unit of risk. Chilwa Minerals Limited is currently generating about -0.02 per unit of risk. If you would invest 13,358 in Steel Dynamics on September 5, 2024 and sell it today you would earn a total of 780.00 from holding Steel Dynamics or generate 5.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Steel Dynamics vs. Chilwa Minerals Limited
Performance |
| Timeline |
| Steel Dynamics |
| Chilwa Minerals |
Steel Dynamics and Chilwa Minerals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Steel Dynamics and Chilwa Minerals
The main advantage of trading using opposite Steel Dynamics and Chilwa Minerals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics position performs unexpectedly, Chilwa Minerals 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 Chilwa Minerals will offset losses from the drop in Chilwa Minerals' 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 |
| Chilwa Minerals vs. Northern Star Resources | Chilwa Minerals vs. Evolution Mining | Chilwa Minerals vs. Bluescope Steel | Chilwa Minerals vs. Sandfire Resources NL |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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