Correlation Between Steel Dynamics and Direxion Shares
Can any of the company-specific risk be diversified away by investing in both Steel Dynamics and Direxion Shares 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 Direxion Shares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Dynamics and Direxion Shares ETF, you can compare the effects of market volatilities on Steel Dynamics and Direxion Shares 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 Direxion Shares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and Direxion Shares.
Diversification Opportunities for Steel Dynamics and Direxion Shares
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Steel and Direxion is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and Direxion Shares ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Shares ETF 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 Direxion Shares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direxion Shares ETF has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and Direxion Shares go up and down completely randomly.
Pair Corralation between Steel Dynamics and Direxion Shares
Given the investment horizon of 90 days Steel Dynamics is expected to generate 1.38 times less return on investment than Direxion Shares. But when comparing it to its historical volatility, Steel Dynamics is 1.14 times less risky than Direxion Shares. It trades about 0.14 of its potential returns per unit of risk. Direxion Shares ETF is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 15,760 in Direxion Shares ETF on September 3, 2024 and sell it today you would earn a total of 1,940 from holding Direxion Shares ETF or generate 12.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Steel Dynamics vs. Direxion Shares ETF
Performance |
| Timeline |
| Steel Dynamics |
| Direxion Shares ETF |
Steel Dynamics and Direxion Shares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Steel Dynamics and Direxion Shares
The main advantage of trading using opposite Steel Dynamics and Direxion Shares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics position performs unexpectedly, Direxion Shares 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 Direxion Shares will offset losses from the drop in Direxion Shares' 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 |
| Direxion Shares vs. Vanguard Index Funds | Direxion Shares vs. Vanguard Index Funds | Direxion Shares vs. Vanguard STAR Funds | Direxion Shares vs. SPDR SP 500 |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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