Correlation Between Steel Dynamics and Heineken
Can any of the company-specific risk be diversified away by investing in both Steel Dynamics and Heineken 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 Heineken into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Dynamics and Heineken NV, you can compare the effects of market volatilities on Steel Dynamics and Heineken 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 Heineken. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and Heineken.
Diversification Opportunities for Steel Dynamics and Heineken
-0.87 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Steel and Heineken is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and Heineken NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heineken NV 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 Heineken. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heineken NV has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and Heineken go up and down completely randomly.
Pair Corralation between Steel Dynamics and Heineken
Given the investment horizon of 90 days Steel Dynamics is expected to generate 1.08 times more return on investment than Heineken. However, Steel Dynamics is 1.08 times more volatile than Heineken NV. It trades about 0.06 of its potential returns per unit of risk. Heineken NV is currently generating about -0.03 per unit of risk. If you would invest 11,264 in Steel Dynamics on August 24, 2024 and sell it today you would earn a total of 3,242 from holding Steel Dynamics or generate 28.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 87.2% |
| Values | Daily Returns |
Steel Dynamics vs. Heineken NV
Performance |
| Timeline |
| Steel Dynamics |
| Heineken NV |
Steel Dynamics and Heineken Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Steel Dynamics and Heineken
The main advantage of trading using opposite Steel Dynamics and Heineken positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics position performs unexpectedly, Heineken 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 Heineken will offset losses from the drop in Heineken's long position.| Steel Dynamics vs. Cleveland Cliffs | Steel Dynamics vs. United States Steel | Steel Dynamics vs. Reliance Steel Aluminum | Steel Dynamics vs. Nucor Corp |
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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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