Correlation Between Steel Dynamics and General Environmental
Can any of the company-specific risk be diversified away by investing in both Steel Dynamics and General Environmental 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 General Environmental into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Dynamics and General Environmental Conservation, you can compare the effects of market volatilities on Steel Dynamics and General Environmental 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 General Environmental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and General Environmental.
Diversification Opportunities for Steel Dynamics and General Environmental
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between Steel and General is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and General Environmental Conserva in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Environmental 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 General Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Environmental has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and General Environmental go up and down completely randomly.
Pair Corralation between Steel Dynamics and General Environmental
Given the investment horizon of 90 days Steel Dynamics is expected to generate 18.65 times less return on investment than General Environmental. But when comparing it to its historical volatility, Steel Dynamics is 21.14 times less risky than General Environmental. It trades about 0.05 of its potential returns per unit of risk. General Environmental Conservation is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 60.00 in General Environmental Conservation on September 5, 2024 and sell it today you would lose (12.00) from holding General Environmental Conservation or give up 20.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 97.58% |
| Values | Daily Returns |
Steel Dynamics vs. General Environmental Conserva
Performance |
| Timeline |
| Steel Dynamics |
| General Environmental |
Steel Dynamics and General Environmental Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Steel Dynamics and General Environmental
The main advantage of trading using opposite Steel Dynamics and General Environmental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics position performs unexpectedly, General Environmental 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 General Environmental will offset losses from the drop in General Environmental'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 |
| General Environmental vs. Asia Aviation Public | General Environmental vs. Bangkok Dusit Medical | General Environmental vs. Bangkok Expressway and | General Environmental vs. Airports of Thailand |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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