Correlation Between Steel Dynamics and Organto Foods
Can any of the company-specific risk be diversified away by investing in both Steel Dynamics and Organto Foods 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 Organto Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Dynamics and Organto Foods, you can compare the effects of market volatilities on Steel Dynamics and Organto Foods 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 Organto Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and Organto Foods.
Diversification Opportunities for Steel Dynamics and Organto Foods
-0.08 | Correlation Coefficient |
Good diversification
The 3 months correlation between Steel and Organto is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and Organto Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Organto Foods 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 Organto Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Organto Foods has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and Organto Foods go up and down completely randomly.
Pair Corralation between Steel Dynamics and Organto Foods
Given the investment horizon of 90 days Steel Dynamics is expected to generate 0.82 times more return on investment than Organto Foods. However, Steel Dynamics is 1.22 times less risky than Organto Foods. It trades about 0.11 of its potential returns per unit of risk. Organto Foods is currently generating about -0.28 per unit of risk. If you would invest 13,358 in Steel Dynamics on September 4, 2024 and sell it today you would earn a total of 962.00 from holding Steel Dynamics or generate 7.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Steel Dynamics vs. Organto Foods
Performance |
| Timeline |
| Steel Dynamics |
| Organto Foods |
Steel Dynamics and Organto Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Steel Dynamics and Organto Foods
The main advantage of trading using opposite Steel Dynamics and Organto Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics position performs unexpectedly, Organto Foods 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 Organto Foods will offset losses from the drop in Organto Foods' 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 |
| Organto Foods vs. Calavo Growers | Organto Foods vs. SpartanNash Co | Organto Foods vs. The Andersons | Organto Foods vs. The Chefs Warehouse |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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