Correlation Between Steel Dynamics and EssilorLuxottica
Can any of the company-specific risk be diversified away by investing in both Steel Dynamics and EssilorLuxottica 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 EssilorLuxottica into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Dynamics and EssilorLuxottica Socit anonyme, you can compare the effects of market volatilities on Steel Dynamics and EssilorLuxottica 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 EssilorLuxottica. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and EssilorLuxottica.
Diversification Opportunities for Steel Dynamics and EssilorLuxottica
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Steel and EssilorLuxottica is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and EssilorLuxottica Socit anonyme in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EssilorLuxottica Socit 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 EssilorLuxottica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EssilorLuxottica Socit has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and EssilorLuxottica go up and down completely randomly.
Pair Corralation between Steel Dynamics and EssilorLuxottica
Given the investment horizon of 90 days Steel Dynamics is expected to generate 1.15 times more return on investment than EssilorLuxottica. However, Steel Dynamics is 1.15 times more volatile than EssilorLuxottica Socit anonyme. It trades about 0.06 of its potential returns per unit of risk. EssilorLuxottica Socit anonyme is currently generating about 0.06 per unit of risk. If you would invest 9,818 in Steel Dynamics on August 31, 2024 and sell it today you would earn a total of 4,709 from holding Steel Dynamics or generate 47.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.73% |
| Values | Daily Returns |
Steel Dynamics vs. EssilorLuxottica Socit anonyme
Performance |
| Timeline |
| Steel Dynamics |
| EssilorLuxottica Socit |
Steel Dynamics and EssilorLuxottica Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Steel Dynamics and EssilorLuxottica
The main advantage of trading using opposite Steel Dynamics and EssilorLuxottica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics position performs unexpectedly, EssilorLuxottica 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 EssilorLuxottica will offset losses from the drop in EssilorLuxottica'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 |
| EssilorLuxottica vs. Sysmex Corp | EssilorLuxottica vs. Coloplast AS | EssilorLuxottica vs. Essilor International SA | EssilorLuxottica vs. Coloplast A |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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