Correlation Between Steel Dynamics and Magna Mining
Can any of the company-specific risk be diversified away by investing in both Steel Dynamics and Magna Mining 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 Magna Mining into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Dynamics and Magna Mining, you can compare the effects of market volatilities on Steel Dynamics and Magna Mining 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 Magna Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and Magna Mining.
Diversification Opportunities for Steel Dynamics and Magna Mining
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Steel and Magna is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and Magna Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magna Mining 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 Magna Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magna Mining has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and Magna Mining go up and down completely randomly.
Pair Corralation between Steel Dynamics and Magna Mining
Given the investment horizon of 90 days Steel Dynamics is expected to generate 2.75 times less return on investment than Magna Mining. But when comparing it to its historical volatility, Steel Dynamics is 1.3 times less risky than Magna Mining. It trades about 0.1 of its potential returns per unit of risk. Magna Mining is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 85.00 in Magna Mining on August 30, 2024 and sell it today you would earn a total of 17.00 from holding Magna Mining or generate 20.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Steel Dynamics vs. Magna Mining
Performance |
| Timeline |
| Steel Dynamics |
| Magna Mining |
Steel Dynamics and Magna Mining Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Steel Dynamics and Magna Mining
The main advantage of trading using opposite Steel Dynamics and Magna Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics position performs unexpectedly, Magna Mining 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 Magna Mining will offset losses from the drop in Magna Mining'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 |
| Magna Mining vs. Emerita Resources Corp | Magna Mining vs. Stone Gold | Magna Mining vs. BCM Resources | Magna Mining vs. Fathom Nickel |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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