Correlation Between Steel Dynamics and Megapower Makmur
Can any of the company-specific risk be diversified away by investing in both Steel Dynamics and Megapower Makmur 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 Megapower Makmur into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Dynamics and Megapower Makmur TBK, you can compare the effects of market volatilities on Steel Dynamics and Megapower Makmur 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 Megapower Makmur. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and Megapower Makmur.
Diversification Opportunities for Steel Dynamics and Megapower Makmur
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Steel and Megapower is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and Megapower Makmur TBK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Megapower Makmur TBK 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 Megapower Makmur. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Megapower Makmur TBK has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and Megapower Makmur go up and down completely randomly.
Pair Corralation between Steel Dynamics and Megapower Makmur
Given the investment horizon of 90 days Steel Dynamics is expected to generate 0.44 times more return on investment than Megapower Makmur. However, Steel Dynamics is 2.28 times less risky than Megapower Makmur. It trades about -0.3 of its potential returns per unit of risk. Megapower Makmur TBK is currently generating about -0.18 per unit of risk. If you would invest 14,780 in Steel Dynamics on September 12, 2024 and sell it today you would lose (1,344) from holding Steel Dynamics or give up 9.09% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Steel Dynamics vs. Megapower Makmur TBK
Performance |
| Timeline |
| Steel Dynamics |
| Megapower Makmur TBK |
Steel Dynamics and Megapower Makmur Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Steel Dynamics and Megapower Makmur
The main advantage of trading using opposite Steel Dynamics and Megapower Makmur positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics position performs unexpectedly, Megapower Makmur 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 Megapower Makmur will offset losses from the drop in Megapower Makmur'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 |
| Megapower Makmur vs. Terregra Asia Energy | Megapower Makmur vs. Bali Towerindo Sentra | Megapower Makmur vs. Sanurhasta Mitra PT | Megapower Makmur vs. Kencana Energi Lestari |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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