Correlation Between Steel Dynamics and Democratic Large
Can any of the company-specific risk be diversified away by investing in both Steel Dynamics and Democratic Large 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 Democratic Large into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Dynamics and Democratic Large Cap, you can compare the effects of market volatilities on Steel Dynamics and Democratic Large 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 Democratic Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and Democratic Large.
Diversification Opportunities for Steel Dynamics and Democratic Large
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Steel and Democratic is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and Democratic Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Democratic Large Cap 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 Democratic Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Democratic Large Cap has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and Democratic Large go up and down completely randomly.
Pair Corralation between Steel Dynamics and Democratic Large
Given the investment horizon of 90 days Steel Dynamics is expected to generate 3.1 times more return on investment than Democratic Large. However, Steel Dynamics is 3.1 times more volatile than Democratic Large Cap. It trades about 0.1 of its potential returns per unit of risk. Democratic Large Cap is currently generating about 0.2 per unit of risk. If you would invest 11,555 in Steel Dynamics on September 9, 2024 and sell it today you would earn a total of 2,135 from holding Steel Dynamics or generate 18.48% 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. Democratic Large Cap
Performance |
Timeline |
Steel Dynamics |
Democratic Large Cap |
Steel Dynamics and Democratic Large Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Steel Dynamics and Democratic Large
The main advantage of trading using opposite Steel Dynamics and Democratic Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics position performs unexpectedly, Democratic Large 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 Democratic Large will offset losses from the drop in Democratic Large'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 |
Democratic Large vs. Point Bridge GOP | Democratic Large vs. First Trust Dorsey | Democratic Large vs. First Trust Dorsey | Democratic Large vs. First Trust RBA |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
Other Complementary Tools
Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
Bonds Directory Find actively traded corporate debentures issued by US companies | |
Portfolio Analyzer Portfolio analysis module that provides access to portfolio diagnostics and optimization engine | |
Portfolio File Import Quickly import all of your third-party portfolios from your local drive in csv format | |
Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios |