Correlation Between Steel Dynamics and Nitto Denko
Can any of the company-specific risk be diversified away by investing in both Steel Dynamics and Nitto Denko 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 Nitto Denko into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Dynamics and Nitto Denko, you can compare the effects of market volatilities on Steel Dynamics and Nitto Denko 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 Nitto Denko. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and Nitto Denko.
Diversification Opportunities for Steel Dynamics and Nitto Denko
-0.75 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Steel and Nitto is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and Nitto Denko in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nitto Denko 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 Nitto Denko. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nitto Denko has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and Nitto Denko go up and down completely randomly.
Pair Corralation between Steel Dynamics and Nitto Denko
Given the investment horizon of 90 days Steel Dynamics is expected to generate 1.89 times more return on investment than Nitto Denko. However, Steel Dynamics is 1.89 times more volatile than Nitto Denko. It trades about 0.1 of its potential returns per unit of risk. Nitto Denko is currently generating about -0.15 per unit of risk. If you would invest 13,516 in Steel Dynamics on August 30, 2024 and sell it today you would earn a total of 867.00 from holding Steel Dynamics or generate 6.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Steel Dynamics vs. Nitto Denko
Performance |
| Timeline |
| Steel Dynamics |
| Nitto Denko |
Steel Dynamics and Nitto Denko Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Steel Dynamics and Nitto Denko
The main advantage of trading using opposite Steel Dynamics and Nitto Denko positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics position performs unexpectedly, Nitto Denko 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 Nitto Denko will offset losses from the drop in Nitto Denko'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 |
| Nitto Denko vs. Minerals Technologies | Nitto Denko vs. Hawkins | Nitto Denko vs. NewMarket | Nitto Denko vs. Ecovyst |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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