Correlation Between Steel Dynamics and Nippon Steel
Can any of the company-specific risk be diversified away by investing in both Steel Dynamics and Nippon Steel 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 Nippon Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Dynamics and Nippon Steel Corp, you can compare the effects of market volatilities on Steel Dynamics and Nippon Steel 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 Nippon Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and Nippon Steel.
Diversification Opportunities for Steel Dynamics and Nippon Steel
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Steel and Nippon is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and Nippon Steel Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nippon Steel Corp 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 Nippon Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nippon Steel Corp has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and Nippon Steel go up and down completely randomly.
Pair Corralation between Steel Dynamics and Nippon Steel
Given the investment horizon of 90 days Steel Dynamics is expected to generate 1.53 times more return on investment than Nippon Steel. However, Steel Dynamics is 1.53 times more volatile than Nippon Steel Corp. It trades about 0.32 of its potential returns per unit of risk. Nippon Steel Corp is currently generating about 0.02 per unit of risk. If you would invest 11,193 in Steel Dynamics on November 3, 2024 and sell it today you would earn a total of 1,627 from holding Steel Dynamics or generate 14.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Steel Dynamics vs. Nippon Steel Corp
Performance |
| Timeline |
| Steel Dynamics |
| Nippon Steel Corp |
Steel Dynamics and Nippon Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Steel Dynamics and Nippon Steel
The main advantage of trading using opposite Steel Dynamics and Nippon Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics position performs unexpectedly, Nippon Steel 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 Nippon Steel will offset losses from the drop in Nippon Steel'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 |
| Nippon Steel vs. Olympic Steel | Nippon Steel vs. POSCO Holdings | Nippon Steel vs. Steel Dynamics | Nippon Steel vs. Outokumpu Oyj ADR |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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