Correlation Between Steel Dynamics and KCE EL
Can any of the company-specific risk be diversified away by investing in both Steel Dynamics and KCE EL 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 KCE EL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Dynamics and KCE EL PCL, you can compare the effects of market volatilities on Steel Dynamics and KCE EL 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 KCE EL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and KCE EL.
Diversification Opportunities for Steel Dynamics and KCE EL
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Steel and KCE is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and KCE EL PCL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KCE EL PCL 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 KCE EL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KCE EL PCL has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and KCE EL go up and down completely randomly.
Pair Corralation between Steel Dynamics and KCE EL
Given the investment horizon of 90 days Steel Dynamics is expected to generate 0.98 times more return on investment than KCE EL. However, Steel Dynamics is 1.03 times less risky than KCE EL. It trades about 0.17 of its potential returns per unit of risk. KCE EL PCL is currently generating about -0.21 per unit of risk. If you would invest 11,354 in Steel Dynamics on September 3, 2024 and sell it today you would earn a total of 3,173 from holding Steel Dynamics or generate 27.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 98.46% |
| Values | Daily Returns |
Steel Dynamics vs. KCE EL PCL
Performance |
| Timeline |
| Steel Dynamics |
| KCE EL PCL |
Steel Dynamics and KCE EL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Steel Dynamics and KCE EL
The main advantage of trading using opposite Steel Dynamics and KCE EL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics position performs unexpectedly, KCE EL 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 KCE EL will offset losses from the drop in KCE EL'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 |
| KCE EL vs. GREENX METALS LTD | KCE EL vs. SIDETRADE EO 1 | KCE EL vs. Perseus Mining Limited | KCE EL vs. RETAIL FOOD GROUP |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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