Correlation Between Steel Dynamics and First National
Can any of the company-specific risk be diversified away by investing in both Steel Dynamics and First National 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 First National into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Dynamics and First National Energy, you can compare the effects of market volatilities on Steel Dynamics and First National 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 First National. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and First National.
Diversification Opportunities for Steel Dynamics and First National
-0.79 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Steel and First is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and First National Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First National Energy 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 First National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First National Energy has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and First National go up and down completely randomly.
Pair Corralation between Steel Dynamics and First National
Given the investment horizon of 90 days Steel Dynamics is expected to generate 88.41 times less return on investment than First National. But when comparing it to its historical volatility, Steel Dynamics is 54.37 times less risky than First National. It trades about 0.06 of its potential returns per unit of risk. First National Energy is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 55.00 in First National Energy on August 31, 2024 and sell it today you would lose (45.94) from holding First National Energy or give up 83.53% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.73% |
| Values | Daily Returns |
Steel Dynamics vs. First National Energy
Performance |
| Timeline |
| Steel Dynamics |
| First National Energy |
Steel Dynamics and First National Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Steel Dynamics and First National
The main advantage of trading using opposite Steel Dynamics and First National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics position performs unexpectedly, First National 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 First National will offset losses from the drop in First National'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 |
| First National vs. Kontrol Technologies Corp | First National vs. PwrCor Inc | First National vs. 808 Renewable Energy | First National vs. Boralex |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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