Correlation Between Steel Dynamics and Orica
Can any of the company-specific risk be diversified away by investing in both Steel Dynamics and Orica 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 Orica into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Dynamics and Orica Ltd ADR, you can compare the effects of market volatilities on Steel Dynamics and Orica 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 Orica. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and Orica.
Diversification Opportunities for Steel Dynamics and Orica
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Steel and Orica is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and Orica Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orica Ltd ADR 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 Orica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orica Ltd ADR has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and Orica go up and down completely randomly.
Pair Corralation between Steel Dynamics and Orica
Given the investment horizon of 90 days Steel Dynamics is expected to generate 1.03 times more return on investment than Orica. However, Steel Dynamics is 1.03 times more volatile than Orica Ltd ADR. It trades about 0.1 of its potential returns per unit of risk. Orica Ltd ADR is currently generating about 0.01 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 | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Steel Dynamics vs. Orica Ltd ADR
Performance |
| Timeline |
| Steel Dynamics |
| Orica Ltd ADR |
Steel Dynamics and Orica Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Steel Dynamics and Orica
The main advantage of trading using opposite Steel Dynamics and Orica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics position performs unexpectedly, Orica 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 Orica will offset losses from the drop in Orica'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 |
| Orica vs. Green Star Products | Orica vs. Greystone Logistics | Orica vs. Iofina plc | Orica vs. Crown Electrokinetics Corp |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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