Correlation Between Steel Dynamics and Mfs High
Can any of the company-specific risk be diversified away by investing in both Steel Dynamics and Mfs High 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 Mfs High into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Dynamics and Mfs High Yield, you can compare the effects of market volatilities on Steel Dynamics and Mfs High 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 Mfs High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and Mfs High.
Diversification Opportunities for Steel Dynamics and Mfs High
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Steel and Mfs is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and Mfs High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mfs High Yield 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 Mfs High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mfs High Yield has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and Mfs High go up and down completely randomly.
Pair Corralation between Steel Dynamics and Mfs High
Given the investment horizon of 90 days Steel Dynamics is expected to generate 21.94 times more return on investment than Mfs High. However, Steel Dynamics is 21.94 times more volatile than Mfs High Yield. It trades about 0.14 of its potential returns per unit of risk. Mfs High Yield is currently generating about 0.12 per unit of risk. If you would invest 13,358 in Steel Dynamics on September 3, 2024 and sell it today you would earn a total of 1,169 from holding Steel Dynamics or generate 8.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.0% |
| Values | Daily Returns |
Steel Dynamics vs. Mfs High Yield
Performance |
| Timeline |
| Steel Dynamics |
| Mfs High Yield |
Steel Dynamics and Mfs High Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Steel Dynamics and Mfs High
The main advantage of trading using opposite Steel Dynamics and Mfs High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics position performs unexpectedly, Mfs High 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 Mfs High will offset losses from the drop in Mfs High'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 |
| Mfs High vs. Vanguard High Yield Corporate | Mfs High vs. Vanguard High Yield Porate | Mfs High vs. Blackrock Hi Yld | Mfs High vs. Blackrock High Yield |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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