Correlation Between Steel Dynamics and EBullion
Can any of the company-specific risk be diversified away by investing in both Steel Dynamics and EBullion 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 EBullion into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Dynamics and EBullion, you can compare the effects of market volatilities on Steel Dynamics and EBullion 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 EBullion. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and EBullion.
Diversification Opportunities for Steel Dynamics and EBullion
-0.72 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Steel and EBullion is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and EBullion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EBullion 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 EBullion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EBullion has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and EBullion go up and down completely randomly.
Pair Corralation between Steel Dynamics and EBullion
Given the investment horizon of 90 days Steel Dynamics is expected to generate 7.41 times less return on investment than EBullion. But when comparing it to its historical volatility, Steel Dynamics is 8.38 times less risky than EBullion. It trades about 0.04 of its potential returns per unit of risk. EBullion is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 0.50 in EBullion on August 29, 2024 and sell it today you would lose (0.38) from holding EBullion or give up 76.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 31.52% |
| Values | Daily Returns |
Steel Dynamics vs. EBullion
Performance |
| Timeline |
| Steel Dynamics |
| EBullion |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Steel Dynamics and EBullion Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Steel Dynamics and EBullion
The main advantage of trading using opposite Steel Dynamics and EBullion positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics position performs unexpectedly, EBullion 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 EBullion will offset losses from the drop in EBullion's long position.The idea behind Steel Dynamics and EBullion pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| EBullion vs. SPENN Technology AS | EBullion vs. Arcane Crypto AB | EBullion vs. OFX Group Ltd | EBullion vs. Blockmate Ventures |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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