Correlation Between Steel Dynamics and Micro-Mechanics (Holdings)
Can any of the company-specific risk be diversified away by investing in both Steel Dynamics and Micro-Mechanics (Holdings) 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 Micro-Mechanics (Holdings) into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Dynamics and Micro Mechanics, you can compare the effects of market volatilities on Steel Dynamics and Micro-Mechanics (Holdings) 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 Micro-Mechanics (Holdings). Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and Micro-Mechanics (Holdings).
Diversification Opportunities for Steel Dynamics and Micro-Mechanics (Holdings)
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Steel and Micro-Mechanics is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and Micro Mechanics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Micro-Mechanics (Holdings) 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 Micro-Mechanics (Holdings). Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Micro-Mechanics (Holdings) has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and Micro-Mechanics (Holdings) go up and down completely randomly.
Pair Corralation between Steel Dynamics and Micro-Mechanics (Holdings)
Given the investment horizon of 90 days Steel Dynamics is expected to generate 1.31 times less return on investment than Micro-Mechanics (Holdings). But when comparing it to its historical volatility, Steel Dynamics is 1.21 times less risky than Micro-Mechanics (Holdings). It trades about 0.12 of its potential returns per unit of risk. Micro Mechanics is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 99.00 in Micro Mechanics on August 30, 2024 and sell it today you would earn a total of 18.00 from holding Micro Mechanics or generate 18.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 97.73% |
| Values | Daily Returns |
Steel Dynamics vs. Micro Mechanics
Performance |
| Timeline |
| Steel Dynamics |
| Micro-Mechanics (Holdings) |
Steel Dynamics and Micro-Mechanics (Holdings) Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Steel Dynamics and Micro-Mechanics (Holdings)
The main advantage of trading using opposite Steel Dynamics and Micro-Mechanics (Holdings) positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics position performs unexpectedly, Micro-Mechanics (Holdings) 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 Micro-Mechanics (Holdings) will offset losses from the drop in Micro-Mechanics (Holdings)'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 |
| Micro-Mechanics (Holdings) vs. ASML Holding NV | Micro-Mechanics (Holdings) vs. ASML Holding NV | Micro-Mechanics (Holdings) vs. Applied Materials | Micro-Mechanics (Holdings) vs. Lam Research Corp |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
Other Complementary Tools
| Funds Screener Find actively-traded funds from around the world traded on over 30 global exchanges | |
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing | |
| Sync Your Broker Sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors. | |
| FinTech Suite Use AI to screen and filter profitable investment opportunities | |
| Volatility Analysis Get historical volatility and risk analysis based on latest market data |