Correlation Between Steel Dynamics and NCBA GROUP
Can any of the company-specific risk be diversified away by investing in both Steel Dynamics and NCBA GROUP 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 NCBA GROUP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Dynamics and NCBA GROUP PLC, you can compare the effects of market volatilities on Steel Dynamics and NCBA GROUP 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 NCBA GROUP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and NCBA GROUP.
Diversification Opportunities for Steel Dynamics and NCBA GROUP
0.19 | Correlation Coefficient |
Average diversification
The 3 months correlation between Steel and NCBA is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and NCBA GROUP PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NCBA GROUP PLC 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 NCBA GROUP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NCBA GROUP PLC has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and NCBA GROUP go up and down completely randomly.
Pair Corralation between Steel Dynamics and NCBA GROUP
Given the investment horizon of 90 days Steel Dynamics is expected to generate 1.4 times more return on investment than NCBA GROUP. However, Steel Dynamics is 1.4 times more volatile than NCBA GROUP PLC. It trades about 0.09 of its potential returns per unit of risk. NCBA GROUP PLC is currently generating about -0.04 per unit of risk. If you would invest 13,358 in Steel Dynamics on September 5, 2024 and sell it today you would earn a total of 780.00 from holding Steel Dynamics or generate 5.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Steel Dynamics vs. NCBA GROUP PLC
Performance |
| Timeline |
| Steel Dynamics |
| NCBA GROUP PLC |
Steel Dynamics and NCBA GROUP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Steel Dynamics and NCBA GROUP
The main advantage of trading using opposite Steel Dynamics and NCBA GROUP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics position performs unexpectedly, NCBA GROUP 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 NCBA GROUP will offset losses from the drop in NCBA GROUP'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 |
| NCBA GROUP vs. EQUITY GROUP HOLDINGS | NCBA GROUP vs. BRITISH AMERICAN TOBACCO | NCBA GROUP vs. CO OPERATIVE BANK OF | NCBA GROUP vs. ABSA NEW GOLD |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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