Correlation Between Steel Dynamics and ECGI Holdings
Can any of the company-specific risk be diversified away by investing in both Steel Dynamics and ECGI Holdings 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 ECGI Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Dynamics and ECGI Holdings, you can compare the effects of market volatilities on Steel Dynamics and ECGI Holdings 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 ECGI Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and ECGI Holdings.
Diversification Opportunities for Steel Dynamics and ECGI Holdings
-0.75 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Steel and ECGI is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and ECGI Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ECGI Holdings 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 ECGI Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ECGI Holdings has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and ECGI Holdings go up and down completely randomly.
Pair Corralation between Steel Dynamics and ECGI Holdings
Given the investment horizon of 90 days Steel Dynamics is expected to generate 10.31 times less return on investment than ECGI Holdings. But when comparing it to its historical volatility, Steel Dynamics is 10.79 times less risky than ECGI Holdings. It trades about 0.06 of its potential returns per unit of risk. ECGI Holdings is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 1.98 in ECGI Holdings on September 1, 2024 and sell it today you would lose (1.87) from holding ECGI Holdings or give up 94.44% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Steel Dynamics vs. ECGI Holdings
Performance |
| Timeline |
| Steel Dynamics |
| ECGI Holdings |
Steel Dynamics and ECGI Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Steel Dynamics and ECGI Holdings
The main advantage of trading using opposite Steel Dynamics and ECGI Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics position performs unexpectedly, ECGI Holdings 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 ECGI Holdings will offset losses from the drop in ECGI Holdings' 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 |
| ECGI Holdings vs. Tandem Diabetes Care | ECGI Holdings vs. Transportadora de Gas | ECGI Holdings vs. Aris Water Solutions | ECGI Holdings vs. Catalent |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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