Correlation Between Steel Dynamics and Limited Term
Can any of the company-specific risk be diversified away by investing in both Steel Dynamics and Limited Term 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 Limited Term into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Dynamics and Limited Term Tax, you can compare the effects of market volatilities on Steel Dynamics and Limited Term 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 Limited Term. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and Limited Term.
Diversification Opportunities for Steel Dynamics and Limited Term
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Steel and Limited is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and Limited Term Tax in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Limited Term Tax 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 Limited Term. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Limited Term Tax has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and Limited Term go up and down completely randomly.
Pair Corralation between Steel Dynamics and Limited Term
Given the investment horizon of 90 days Steel Dynamics is expected to generate 19.04 times more return on investment than Limited Term. However, Steel Dynamics is 19.04 times more volatile than Limited Term Tax. It trades about 0.13 of its potential returns per unit of risk. Limited Term Tax is currently generating about 0.15 per unit of risk. If you would invest 13,358 in Steel Dynamics on September 4, 2024 and sell it today you would earn a total of 1,123 from holding Steel Dynamics or generate 8.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
Steel Dynamics vs. Limited Term Tax
Performance |
| Timeline |
| Steel Dynamics |
| Limited Term Tax |
Steel Dynamics and Limited Term Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Steel Dynamics and Limited Term
The main advantage of trading using opposite Steel Dynamics and Limited Term positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics position performs unexpectedly, Limited Term 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 Limited Term will offset losses from the drop in Limited Term'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 |
| Limited Term vs. Aqr Large Cap | Limited Term vs. Avantis Large Cap | Limited Term vs. Qs Large Cap | Limited Term vs. Siit Large Cap |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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