Correlation Between Steel Dynamics and Frequency Exchange
Can any of the company-specific risk be diversified away by investing in both Steel Dynamics and Frequency Exchange 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 Frequency Exchange into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Dynamics and Frequency Exchange Corp, you can compare the effects of market volatilities on Steel Dynamics and Frequency Exchange 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 Frequency Exchange. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and Frequency Exchange.
Diversification Opportunities for Steel Dynamics and Frequency Exchange
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Steel and Frequency is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and Frequency Exchange Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Frequency Exchange Corp 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 Frequency Exchange. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Frequency Exchange Corp has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and Frequency Exchange go up and down completely randomly.
Pair Corralation between Steel Dynamics and Frequency Exchange
Given the investment horizon of 90 days Steel Dynamics is expected to generate 6.87 times less return on investment than Frequency Exchange. But when comparing it to its historical volatility, Steel Dynamics is 5.37 times less risky than Frequency Exchange. It trades about 0.13 of its potential returns per unit of risk. Frequency Exchange Corp is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 20.00 in Frequency Exchange Corp on September 4, 2024 and sell it today you would earn a total of 10.00 from holding Frequency Exchange Corp or generate 50.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 90.91% |
| Values | Daily Returns |
Steel Dynamics vs. Frequency Exchange Corp
Performance |
| Timeline |
| Steel Dynamics |
| Frequency Exchange Corp |
Steel Dynamics and Frequency Exchange Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Steel Dynamics and Frequency Exchange
The main advantage of trading using opposite Steel Dynamics and Frequency Exchange positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics position performs unexpectedly, Frequency Exchange 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 Frequency Exchange will offset losses from the drop in Frequency Exchange'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 |
| Frequency Exchange vs. Walmart Inc CDR | Frequency Exchange vs. Amazon CDR | Frequency Exchange vs. Berkshire Hathaway CDR | Frequency Exchange vs. UnitedHealth Group CDR |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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