Correlation Between Steel Dynamics and Ferrexpo PLC
Can any of the company-specific risk be diversified away by investing in both Steel Dynamics and Ferrexpo PLC 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 Ferrexpo PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Dynamics and Ferrexpo PLC, you can compare the effects of market volatilities on Steel Dynamics and Ferrexpo PLC 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 Ferrexpo PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and Ferrexpo PLC.
Diversification Opportunities for Steel Dynamics and Ferrexpo PLC
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Steel and Ferrexpo is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and Ferrexpo PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ferrexpo PLC 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 Ferrexpo PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ferrexpo PLC has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and Ferrexpo PLC go up and down completely randomly.
Pair Corralation between Steel Dynamics and Ferrexpo PLC
Given the investment horizon of 90 days Steel Dynamics is expected to generate 4.59 times less return on investment than Ferrexpo PLC. But when comparing it to its historical volatility, Steel Dynamics is 3.35 times less risky than Ferrexpo PLC. It trades about 0.12 of its potential returns per unit of risk. Ferrexpo PLC is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 57.00 in Ferrexpo PLC on August 31, 2024 and sell it today you would earn a total of 38.00 from holding Ferrexpo PLC or generate 66.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Steel Dynamics vs. Ferrexpo PLC
Performance |
| Timeline |
| Steel Dynamics |
| Ferrexpo PLC |
Steel Dynamics and Ferrexpo PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Steel Dynamics and Ferrexpo PLC
The main advantage of trading using opposite Steel Dynamics and Ferrexpo PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics position performs unexpectedly, Ferrexpo PLC 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 Ferrexpo PLC will offset losses from the drop in Ferrexpo PLC'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 |
| Ferrexpo PLC vs. Olympic Steel | Ferrexpo PLC vs. POSCO Holdings | Ferrexpo PLC vs. Steel Dynamics | Ferrexpo PLC vs. Universal Stainless Alloy |
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 CEOs Directory module to screen CEOs from public companies around the world.
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