Correlation Between Steel Dynamics and Legg Mason
Can any of the company-specific risk be diversified away by investing in both Steel Dynamics and Legg Mason 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 Legg Mason into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Dynamics and Legg Mason Bw, you can compare the effects of market volatilities on Steel Dynamics and Legg Mason 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 Legg Mason. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and Legg Mason.
Diversification Opportunities for Steel Dynamics and Legg Mason
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Steel and Legg is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and Legg Mason Bw in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legg Mason Bw 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 Legg Mason. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Legg Mason Bw has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and Legg Mason go up and down completely randomly.
Pair Corralation between Steel Dynamics and Legg Mason
Given the investment horizon of 90 days Steel Dynamics is expected to generate 3.46 times more return on investment than Legg Mason. However, Steel Dynamics is 3.46 times more volatile than Legg Mason Bw. It trades about 0.14 of its potential returns per unit of risk. Legg Mason Bw is currently generating about 0.34 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 | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Steel Dynamics vs. Legg Mason Bw
Performance |
| Timeline |
| Steel Dynamics |
| Legg Mason Bw |
Steel Dynamics and Legg Mason Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Steel Dynamics and Legg Mason
The main advantage of trading using opposite Steel Dynamics and Legg Mason positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics position performs unexpectedly, Legg Mason 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 Legg Mason will offset losses from the drop in Legg Mason'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 |
| Legg Mason vs. Vanguard Value Index | Legg Mason vs. Dodge Cox Stock | Legg Mason vs. American Funds American | Legg Mason vs. American Funds American |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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