Correlation Between Steel Dynamics and Federated Government
Can any of the company-specific risk be diversified away by investing in both Steel Dynamics and Federated Government 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 Federated Government into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Dynamics and Federated Government Income, you can compare the effects of market volatilities on Steel Dynamics and Federated Government 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 Federated Government. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and Federated Government.
Diversification Opportunities for Steel Dynamics and Federated Government
-0.82 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Steel and Federated is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and Federated Government Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Government 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 Federated Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Government has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and Federated Government go up and down completely randomly.
Pair Corralation between Steel Dynamics and Federated Government
Given the investment horizon of 90 days Steel Dynamics is expected to under-perform the Federated Government. In addition to that, Steel Dynamics is 5.58 times more volatile than Federated Government Income. It trades about -0.26 of its total potential returns per unit of risk. Federated Government Income is currently generating about 0.22 per unit of volatility. If you would invest 881.00 in Federated Government Income on September 13, 2024 and sell it today you would earn a total of 10.00 from holding Federated Government Income or generate 1.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Steel Dynamics vs. Federated Government Income
Performance |
| Timeline |
| Steel Dynamics |
| Federated Government |
Steel Dynamics and Federated Government Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Steel Dynamics and Federated Government
The main advantage of trading using opposite Steel Dynamics and Federated Government positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics position performs unexpectedly, Federated Government 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 Federated Government will offset losses from the drop in Federated Government'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 |
| Federated Government vs. Ab Discovery Value | Federated Government vs. Pace Smallmedium Value | Federated Government vs. Victory Rs Partners | Federated Government vs. Queens Road Small |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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