Correlation Between Steel Dynamics and Hennessy Gas
Can any of the company-specific risk be diversified away by investing in both Steel Dynamics and Hennessy Gas 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 Hennessy Gas into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Dynamics and Hennessy Gas Utility, you can compare the effects of market volatilities on Steel Dynamics and Hennessy Gas 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 Hennessy Gas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and Hennessy Gas.
Diversification Opportunities for Steel Dynamics and Hennessy Gas
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Steel and Hennessy is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and Hennessy Gas Utility in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hennessy Gas Utility 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 Hennessy Gas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hennessy Gas Utility has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and Hennessy Gas go up and down completely randomly.
Pair Corralation between Steel Dynamics and Hennessy Gas
Given the investment horizon of 90 days Steel Dynamics is expected to generate 3.82 times more return on investment than Hennessy Gas. However, Steel Dynamics is 3.82 times more volatile than Hennessy Gas Utility. It trades about 0.11 of its potential returns per unit of risk. Hennessy Gas Utility is currently generating about 0.43 per unit of risk. If you would invest 13,358 in Steel Dynamics on September 5, 2024 and sell it today you would earn a total of 962.00 from holding Steel Dynamics or generate 7.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Steel Dynamics vs. Hennessy Gas Utility
Performance |
| Timeline |
| Steel Dynamics |
| Hennessy Gas Utility |
Steel Dynamics and Hennessy Gas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Steel Dynamics and Hennessy Gas
The main advantage of trading using opposite Steel Dynamics and Hennessy Gas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics position performs unexpectedly, Hennessy Gas 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 Hennessy Gas will offset losses from the drop in Hennessy Gas' 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 |
| Hennessy Gas vs. Utilities Fund Investor | Hennessy Gas vs. Amg Yacktman Focused | Hennessy Gas vs. Chemicals Portfolio Chemicals | Hennessy Gas vs. Invesco Energy Fund |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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