Correlation Between Steel Dynamics and Ishares II
Can any of the company-specific risk be diversified away by investing in both Steel Dynamics and Ishares II 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 Ishares II into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Dynamics and Ishares II PLC, you can compare the effects of market volatilities on Steel Dynamics and Ishares II 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 Ishares II. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and Ishares II.
Diversification Opportunities for Steel Dynamics and Ishares II
-0.03 | Correlation Coefficient |
Good diversification
The 3 months correlation between Steel and Ishares is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and Ishares II PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ishares II PLC 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 Ishares II. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ishares II PLC has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and Ishares II go up and down completely randomly.
Pair Corralation between Steel Dynamics and Ishares II
Given the investment horizon of 90 days Steel Dynamics is expected to generate 6.24 times more return on investment than Ishares II. However, Steel Dynamics is 6.24 times more volatile than Ishares II PLC. It trades about 0.06 of its potential returns per unit of risk. Ishares II PLC is currently generating about 0.05 per unit of risk. If you would invest 11,317 in Steel Dynamics on September 4, 2024 and sell it today you would earn a total of 3,164 from holding Steel Dynamics or generate 27.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 81.38% |
| Values | Daily Returns |
Steel Dynamics vs. Ishares II PLC
Performance |
| Timeline |
| Steel Dynamics |
| Ishares II PLC |
Steel Dynamics and Ishares II Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Steel Dynamics and Ishares II
The main advantage of trading using opposite Steel Dynamics and Ishares II positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics position performs unexpectedly, Ishares II 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 Ishares II will offset losses from the drop in Ishares II'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 |
| Ishares II vs. UBS Fund Solutions | Ishares II vs. Xtrackers II | Ishares II vs. Xtrackers Nikkei 225 | Ishares II vs. iShares VII PLC |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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