Correlation Between Steel Dynamics and Green Globe
Can any of the company-specific risk be diversified away by investing in both Steel Dynamics and Green Globe 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 Green Globe into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Dynamics and Green Globe International, you can compare the effects of market volatilities on Steel Dynamics and Green Globe 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 Green Globe. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and Green Globe.
Diversification Opportunities for Steel Dynamics and Green Globe
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Steel and Green is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and Green Globe International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Green Globe International 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 Green Globe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Green Globe International has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and Green Globe go up and down completely randomly.
Pair Corralation between Steel Dynamics and Green Globe
Given the investment horizon of 90 days Steel Dynamics is expected to generate 4.86 times less return on investment than Green Globe. But when comparing it to its historical volatility, Steel Dynamics is 7.45 times less risky than Green Globe. It trades about 0.06 of its potential returns per unit of risk. Green Globe International is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 0.14 in Green Globe International on August 31, 2024 and sell it today you would lose (0.10) from holding Green Globe International or give up 71.43% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.73% |
| Values | Daily Returns |
Steel Dynamics vs. Green Globe International
Performance |
| Timeline |
| Steel Dynamics |
| Green Globe International |
Steel Dynamics and Green Globe Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Steel Dynamics and Green Globe
The main advantage of trading using opposite Steel Dynamics and Green Globe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics position performs unexpectedly, Green Globe 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 Green Globe will offset losses from the drop in Green Globe'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 |
| Green Globe vs. Imperial Brands PLC | Green Globe vs. Turning Point Brands | Green Globe vs. Universal | Green Globe vs. Japan Tobacco ADR |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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