Correlation Between Steel Dynamics and IShares China
Can any of the company-specific risk be diversified away by investing in both Steel Dynamics and IShares China 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 IShares China into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Dynamics and iShares China CNY, you can compare the effects of market volatilities on Steel Dynamics and IShares China 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 IShares China. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and IShares China.
Diversification Opportunities for Steel Dynamics and IShares China
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Steel and IShares is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and iShares China CNY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares China CNY 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 IShares China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares China CNY has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and IShares China go up and down completely randomly.
Pair Corralation between Steel Dynamics and IShares China
Given the investment horizon of 90 days Steel Dynamics is expected to generate 7.42 times more return on investment than IShares China. However, Steel Dynamics is 7.42 times more volatile than iShares China CNY. It trades about 0.06 of its potential returns per unit of risk. iShares China CNY is currently generating about 0.07 per unit of risk. If you would invest 12,623 in Steel Dynamics on September 3, 2024 and sell it today you would earn a total of 1,904 from holding Steel Dynamics or generate 15.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 96.9% |
| Values | Daily Returns |
Steel Dynamics vs. iShares China CNY
Performance |
| Timeline |
| Steel Dynamics |
| iShares China CNY |
Steel Dynamics and IShares China Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Steel Dynamics and IShares China
The main advantage of trading using opposite Steel Dynamics and IShares China positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics position performs unexpectedly, IShares China 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 IShares China will offset losses from the drop in IShares China'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 |
| IShares China vs. Vanguard FTSE Developed | IShares China vs. HSBC MSCI Japan | IShares China vs. iShares II Public | IShares China vs. Hydratec Industries NV |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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