Correlation Between Steel Dynamics and Trend ETF
Can any of the company-specific risk be diversified away by investing in both Steel Dynamics and Trend ETF 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 Trend ETF into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Dynamics and Trend ETF MSCI, you can compare the effects of market volatilities on Steel Dynamics and Trend ETF 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 Trend ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and Trend ETF.
Diversification Opportunities for Steel Dynamics and Trend ETF
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between Steel and Trend is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and Trend ETF MSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trend ETF MSCI 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 Trend ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trend ETF MSCI has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and Trend ETF go up and down completely randomly.
Pair Corralation between Steel Dynamics and Trend ETF
Given the investment horizon of 90 days Steel Dynamics is expected to generate 2.51 times more return on investment than Trend ETF. However, Steel Dynamics is 2.51 times more volatile than Trend ETF MSCI. It trades about 0.14 of its potential returns per unit of risk. Trend ETF MSCI is currently generating about 0.04 per unit of risk. If you would invest 11,014 in Steel Dynamics on September 12, 2024 and sell it today you would earn a total of 2,442 from holding Steel Dynamics or generate 22.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.44% |
| Values | Daily Returns |
Steel Dynamics vs. Trend ETF MSCI
Performance |
| Timeline |
| Steel Dynamics |
| Trend ETF MSCI |
Steel Dynamics and Trend ETF Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Steel Dynamics and Trend ETF
The main advantage of trading using opposite Steel Dynamics and Trend ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics position performs unexpectedly, Trend ETF 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 Trend ETF will offset losses from the drop in Trend ETF'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 |
| Trend ETF vs. Energisa SA | Trend ETF vs. BTG Pactual Logstica | Trend ETF vs. Plano Plano Desenvolvimento | Trend ETF vs. Companhia Habitasul de |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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