Correlation Between Steel Dynamics and Century Next
Can any of the company-specific risk be diversified away by investing in both Steel Dynamics and Century Next 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 Century Next into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Dynamics and Century Next Financial, you can compare the effects of market volatilities on Steel Dynamics and Century Next 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 Century Next. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and Century Next.
Diversification Opportunities for Steel Dynamics and Century Next
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Steel and Century is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and Century Next Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Century Next Financial 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 Century Next. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Century Next Financial has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and Century Next go up and down completely randomly.
Pair Corralation between Steel Dynamics and Century Next
Given the investment horizon of 90 days Steel Dynamics is expected to generate 6.29 times more return on investment than Century Next. However, Steel Dynamics is 6.29 times more volatile than Century Next Financial. It trades about 0.09 of its potential returns per unit of risk. Century Next Financial is currently generating about 0.16 per unit of risk. If you would invest 13,572 in Steel Dynamics on August 29, 2024 and sell it today you would earn a total of 791.00 from holding Steel Dynamics or generate 5.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Steel Dynamics vs. Century Next Financial
Performance |
| Timeline |
| Steel Dynamics |
| Century Next Financial |
Steel Dynamics and Century Next Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Steel Dynamics and Century Next
The main advantage of trading using opposite Steel Dynamics and Century Next positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics position performs unexpectedly, Century Next 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 Century Next will offset losses from the drop in Century Next'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 |
| Century Next vs. Citizens Financial Corp | Century Next vs. Triad Business Bank | Century Next vs. First Ottawa Bancshares | Century Next vs. CCSB Financial Corp |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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