Correlation Between Steel Dynamics and Fjordland Exploration
Can any of the company-specific risk be diversified away by investing in both Steel Dynamics and Fjordland Exploration 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 Fjordland Exploration into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Dynamics and Fjordland Exploration, you can compare the effects of market volatilities on Steel Dynamics and Fjordland Exploration 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 Fjordland Exploration. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and Fjordland Exploration.
Diversification Opportunities for Steel Dynamics and Fjordland Exploration
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Steel and Fjordland is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and Fjordland Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fjordland Exploration 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 Fjordland Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fjordland Exploration has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and Fjordland Exploration go up and down completely randomly.
Pair Corralation between Steel Dynamics and Fjordland Exploration
Given the investment horizon of 90 days Steel Dynamics is expected to generate 4.81 times less return on investment than Fjordland Exploration. But when comparing it to its historical volatility, Steel Dynamics is 7.49 times less risky than Fjordland Exploration. It trades about 0.06 of its potential returns per unit of risk. Fjordland Exploration is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 3.00 in Fjordland Exploration on September 4, 2024 and sell it today you would lose (2.00) from holding Fjordland Exploration or give up 66.67% 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. Fjordland Exploration
Performance |
| Timeline |
| Steel Dynamics |
| Fjordland Exploration |
Steel Dynamics and Fjordland Exploration Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Steel Dynamics and Fjordland Exploration
The main advantage of trading using opposite Steel Dynamics and Fjordland Exploration positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics position performs unexpectedly, Fjordland Exploration 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 Fjordland Exploration will offset losses from the drop in Fjordland Exploration'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 |
| Fjordland Exploration vs. First Majestic Silver | Fjordland Exploration vs. Ivanhoe Energy | Fjordland Exploration vs. Orezone Gold Corp | Fjordland Exploration vs. Faraday Copper Corp |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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