Correlation Between Steel Dynamics and Halma Plc
Can any of the company-specific risk be diversified away by investing in both Steel Dynamics and Halma Plc 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 Halma Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Dynamics and Halma plc, you can compare the effects of market volatilities on Steel Dynamics and Halma Plc 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 Halma Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and Halma Plc.
Diversification Opportunities for Steel Dynamics and Halma Plc
-0.49 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Steel and Halma is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and Halma plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Halma 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 Halma Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Halma plc has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and Halma Plc go up and down completely randomly.
Pair Corralation between Steel Dynamics and Halma Plc
Given the investment horizon of 90 days Steel Dynamics is expected to generate 1.49 times more return on investment than Halma Plc. However, Steel Dynamics is 1.49 times more volatile than Halma plc. It trades about 0.13 of its potential returns per unit of risk. Halma plc is currently generating about 0.01 per unit of risk. If you would invest 11,837 in Steel Dynamics on August 29, 2024 and sell it today you would earn a total of 2,526 from holding Steel Dynamics or generate 21.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Steel Dynamics vs. Halma plc
Performance |
| Timeline |
| Steel Dynamics |
| Halma plc |
Steel Dynamics and Halma Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Steel Dynamics and Halma Plc
The main advantage of trading using opposite Steel Dynamics and Halma Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics position performs unexpectedly, Halma Plc 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 Halma Plc will offset losses from the drop in Halma Plc'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 |
| Halma Plc vs. Honeywell International | Halma Plc vs. 3M Company | Halma Plc vs. Mitsubishi Corp | Halma Plc vs. Hitachi |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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