Correlation Between Steel Dynamics and Living Cell
Can any of the company-specific risk be diversified away by investing in both Steel Dynamics and Living Cell 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 Living Cell into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Dynamics and Living Cell Technologies, you can compare the effects of market volatilities on Steel Dynamics and Living Cell 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 Living Cell. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and Living Cell.
Diversification Opportunities for Steel Dynamics and Living Cell
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Steel and Living is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and Living Cell Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Living Cell Technologies 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 Living Cell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Living Cell Technologies has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and Living Cell go up and down completely randomly.
Pair Corralation between Steel Dynamics and Living Cell
Given the investment horizon of 90 days Steel Dynamics is expected to generate 23.38 times less return on investment than Living Cell. But when comparing it to its historical volatility, Steel Dynamics is 21.09 times less risky than Living Cell. It trades about 0.04 of its potential returns per unit of risk. Living Cell Technologies is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 1.48 in Living Cell Technologies on September 4, 2024 and sell it today you would lose (1.05) from holding Living Cell Technologies or give up 70.95% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Steel Dynamics vs. Living Cell Technologies
Performance |
| Timeline |
| Steel Dynamics |
| Living Cell Technologies |
Steel Dynamics and Living Cell Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Steel Dynamics and Living Cell
The main advantage of trading using opposite Steel Dynamics and Living Cell positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics position performs unexpectedly, Living Cell 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 Living Cell will offset losses from the drop in Living Cell'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 |
| Living Cell vs. Therapeutic Solutions International | Living Cell vs. Alpha Cognition | Living Cell vs. Vg Life Sciences | Living Cell vs. Adagene |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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