Correlation Between Steel Dynamics and Doman Building
Can any of the company-specific risk be diversified away by investing in both Steel Dynamics and Doman Building 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 Doman Building into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Dynamics and Doman Building Materials, you can compare the effects of market volatilities on Steel Dynamics and Doman Building 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 Doman Building. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and Doman Building.
Diversification Opportunities for Steel Dynamics and Doman Building
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Steel and Doman is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and Doman Building Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Doman Building Materials 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 Doman Building. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Doman Building Materials has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and Doman Building go up and down completely randomly.
Pair Corralation between Steel Dynamics and Doman Building
Given the investment horizon of 90 days Steel Dynamics is expected to under-perform the Doman Building. In addition to that, Steel Dynamics is 1.02 times more volatile than Doman Building Materials. It trades about -0.3 of its total potential returns per unit of risk. Doman Building Materials is currently generating about 0.09 per unit of volatility. If you would invest 654.00 in Doman Building Materials on September 12, 2024 and sell it today you would earn a total of 16.00 from holding Doman Building Materials or generate 2.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Steel Dynamics vs. Doman Building Materials
Performance |
| Timeline |
| Steel Dynamics |
| Doman Building Materials |
Steel Dynamics and Doman Building Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Steel Dynamics and Doman Building
The main advantage of trading using opposite Steel Dynamics and Doman Building positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics position performs unexpectedly, Doman Building 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 Doman Building will offset losses from the drop in Doman Building'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 |
| Doman Building vs. Finning International | Doman Building vs. Toromont Industries | Doman Building vs. Aecon Group | Doman Building vs. BTB Real Estate |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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