Correlation Between Steel Dynamics and Litman Gregory
Can any of the company-specific risk be diversified away by investing in both Steel Dynamics and Litman Gregory 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 Litman Gregory into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Dynamics and Litman Gregory Masters, you can compare the effects of market volatilities on Steel Dynamics and Litman Gregory 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 Litman Gregory. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and Litman Gregory.
Diversification Opportunities for Steel Dynamics and Litman Gregory
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Steel and Litman is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and Litman Gregory Masters in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Litman Gregory Masters 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 Litman Gregory. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Litman Gregory Masters has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and Litman Gregory go up and down completely randomly.
Pair Corralation between Steel Dynamics and Litman Gregory
Given the investment horizon of 90 days Steel Dynamics is expected to generate 17.3 times more return on investment than Litman Gregory. However, Steel Dynamics is 17.3 times more volatile than Litman Gregory Masters. It trades about 0.09 of its potential returns per unit of risk. Litman Gregory Masters is currently generating about 0.22 per unit of risk. If you would invest 13,358 in Steel Dynamics on September 5, 2024 and sell it today you would earn a total of 780.00 from holding Steel Dynamics or generate 5.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Steel Dynamics vs. Litman Gregory Masters
Performance |
| Timeline |
| Steel Dynamics |
| Litman Gregory Masters |
Steel Dynamics and Litman Gregory Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Steel Dynamics and Litman Gregory
The main advantage of trading using opposite Steel Dynamics and Litman Gregory positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics position performs unexpectedly, Litman Gregory 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 Litman Gregory will offset losses from the drop in Litman Gregory'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 |
| Litman Gregory vs. Pimco Short Asset | Litman Gregory vs. Doubleline Low Duration | Litman Gregory vs. Palmer Square Ssi | Litman Gregory vs. Short Term Income Fund |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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