Correlation Between Steel Dynamics and Kalo Gold

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Can any of the company-specific risk be diversified away by investing in both Steel Dynamics and Kalo Gold 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 Kalo Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Dynamics and Kalo Gold Holdings, you can compare the effects of market volatilities on Steel Dynamics and Kalo Gold 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 Kalo Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and Kalo Gold.

Diversification Opportunities for Steel Dynamics and Kalo Gold

0.6
  Correlation Coefficient

Poor diversification

The 3 months correlation between Steel and Kalo is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and Kalo Gold Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kalo Gold Holdings 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 Kalo Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kalo Gold Holdings has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and Kalo Gold go up and down completely randomly.

Pair Corralation between Steel Dynamics and Kalo Gold

Given the investment horizon of 90 days Steel Dynamics is expected to generate 0.15 times more return on investment than Kalo Gold. However, Steel Dynamics is 6.67 times less risky than Kalo Gold. It trades about -0.3 of its potential returns per unit of risk. Kalo Gold Holdings is currently generating about -0.08 per unit of risk. If you would invest  14,780  in Steel Dynamics on September 12, 2024 and sell it today you would lose (1,344) from holding Steel Dynamics or give up 9.09% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Steel Dynamics  vs.  Kalo Gold Holdings

 Performance 
       Timeline  
Steel Dynamics 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Steel Dynamics are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile essential indicators, Steel Dynamics exhibited solid returns over the last few months and may actually be approaching a breakup point.
Kalo Gold Holdings 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Kalo Gold Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Kalo Gold reported solid returns over the last few months and may actually be approaching a breakup point.

Steel Dynamics and Kalo Gold Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Steel Dynamics and Kalo Gold

The main advantage of trading using opposite Steel Dynamics and Kalo Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics position performs unexpectedly, Kalo Gold 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 Kalo Gold will offset losses from the drop in Kalo Gold's long position.
The idea behind Steel Dynamics and Kalo Gold Holdings pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.

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