Correlation Between Steel Dynamics and Franklin Minnesota
Can any of the company-specific risk be diversified away by investing in both Steel Dynamics and Franklin Minnesota 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 Franklin Minnesota into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Dynamics and Franklin Minnesota Tax Free, you can compare the effects of market volatilities on Steel Dynamics and Franklin Minnesota 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 Franklin Minnesota. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and Franklin Minnesota.
Diversification Opportunities for Steel Dynamics and Franklin Minnesota
-0.24 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Steel and Franklin is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and Franklin Minnesota Tax Free in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Minnesota Tax 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 Franklin Minnesota. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Minnesota Tax has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and Franklin Minnesota go up and down completely randomly.
Pair Corralation between Steel Dynamics and Franklin Minnesota
Given the investment horizon of 90 days Steel Dynamics is expected to generate 8.21 times more return on investment than Franklin Minnesota. However, Steel Dynamics is 8.21 times more volatile than Franklin Minnesota Tax Free. It trades about 0.03 of its potential returns per unit of risk. Franklin Minnesota Tax Free is currently generating about 0.07 per unit of risk. If you would invest 12,043 in Steel Dynamics on September 12, 2024 and sell it today you would earn a total of 1,393 from holding Steel Dynamics or generate 11.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.6% |
| Values | Daily Returns |
Steel Dynamics vs. Franklin Minnesota Tax Free
Performance |
| Timeline |
| Steel Dynamics |
| Franklin Minnesota Tax |
Steel Dynamics and Franklin Minnesota Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Steel Dynamics and Franklin Minnesota
The main advantage of trading using opposite Steel Dynamics and Franklin Minnesota positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics position performs unexpectedly, Franklin Minnesota 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 Franklin Minnesota will offset losses from the drop in Franklin Minnesota'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 |
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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