Correlation Between Steel Dynamics and Growth Portfolio
Can any of the company-specific risk be diversified away by investing in both Steel Dynamics and Growth Portfolio 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 Growth Portfolio into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Dynamics and Growth Portfolio Class, you can compare the effects of market volatilities on Steel Dynamics and Growth Portfolio 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 Growth Portfolio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and Growth Portfolio.
Diversification Opportunities for Steel Dynamics and Growth Portfolio
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Steel and Growth is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and Growth Portfolio Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Growth Portfolio Class 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 Growth Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Growth Portfolio Class has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and Growth Portfolio go up and down completely randomly.
Pair Corralation between Steel Dynamics and Growth Portfolio
Given the investment horizon of 90 days Steel Dynamics is expected to generate 3.88 times less return on investment than Growth Portfolio. In addition to that, Steel Dynamics is 1.69 times more volatile than Growth Portfolio Class. It trades about 0.09 of its total potential returns per unit of risk. Growth Portfolio Class is currently generating about 0.6 per unit of volatility. If you would invest 4,733 in Growth Portfolio Class on September 5, 2024 and sell it today you would earn a total of 1,397 from holding Growth Portfolio Class or generate 29.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Steel Dynamics vs. Growth Portfolio Class
Performance |
| Timeline |
| Steel Dynamics |
| Growth Portfolio Class |
Steel Dynamics and Growth Portfolio Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Steel Dynamics and Growth Portfolio
The main advantage of trading using opposite Steel Dynamics and Growth Portfolio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics position performs unexpectedly, Growth Portfolio 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 Growth Portfolio will offset losses from the drop in Growth Portfolio'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 |
| Growth Portfolio vs. Mid Cap Growth | Growth Portfolio vs. Small Pany Growth | Growth Portfolio vs. Emerging Markets Portfolio |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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