Correlation Between Steel Dynamics and Blue Sky
Can any of the company-specific risk be diversified away by investing in both Steel Dynamics and Blue Sky 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 Blue Sky into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Dynamics and Blue Sky Uranium, you can compare the effects of market volatilities on Steel Dynamics and Blue Sky 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 Blue Sky. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and Blue Sky.
Diversification Opportunities for Steel Dynamics and Blue Sky
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Steel and Blue is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and Blue Sky Uranium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blue Sky Uranium 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 Blue Sky. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blue Sky Uranium has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and Blue Sky go up and down completely randomly.
Pair Corralation between Steel Dynamics and Blue Sky
Given the investment horizon of 90 days Steel Dynamics is expected to generate 8.22 times less return on investment than Blue Sky. But when comparing it to its historical volatility, Steel Dynamics is 7.14 times less risky than Blue Sky. It trades about 0.05 of its potential returns per unit of risk. Blue Sky Uranium is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 3.72 in Blue Sky Uranium on September 12, 2024 and sell it today you would lose (0.72) from holding Blue Sky Uranium or give up 19.35% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 98.32% |
| Values | Daily Returns |
Steel Dynamics vs. Blue Sky Uranium
Performance |
| Timeline |
| Steel Dynamics |
| Blue Sky Uranium |
Steel Dynamics and Blue Sky Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Steel Dynamics and Blue Sky
The main advantage of trading using opposite Steel Dynamics and Blue Sky positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics position performs unexpectedly, Blue Sky 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 Blue Sky will offset losses from the drop in Blue Sky'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 |
| Blue Sky vs. Benchmark Electronics | Blue Sky vs. AOI Electronics Co | Blue Sky vs. Coeur Mining | Blue Sky vs. Evolution Mining Limited |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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