Correlation Between Steel Dynamics and Outokumpu Oyj
Can any of the company-specific risk be diversified away by investing in both Steel Dynamics and Outokumpu Oyj 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 Outokumpu Oyj into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Dynamics and Outokumpu Oyj ADR, you can compare the effects of market volatilities on Steel Dynamics and Outokumpu Oyj 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 Outokumpu Oyj. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and Outokumpu Oyj.
Diversification Opportunities for Steel Dynamics and Outokumpu Oyj
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Steel and Outokumpu is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and Outokumpu Oyj ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Outokumpu Oyj 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 Outokumpu Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Outokumpu Oyj ADR has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and Outokumpu Oyj go up and down completely randomly.
Pair Corralation between Steel Dynamics and Outokumpu Oyj
Given the investment horizon of 90 days Steel Dynamics is expected to generate 2.7 times more return on investment than Outokumpu Oyj. However, Steel Dynamics is 2.7 times more volatile than Outokumpu Oyj ADR. It trades about 0.17 of its potential returns per unit of risk. Outokumpu Oyj ADR is currently generating about -0.24 per unit of risk. If you would invest 12,864 in Steel Dynamics on August 24, 2024 and sell it today you would earn a total of 1,642 from holding Steel Dynamics or generate 12.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Steel Dynamics vs. Outokumpu Oyj ADR
Performance |
| Timeline |
| Steel Dynamics |
| Outokumpu Oyj ADR |
Steel Dynamics and Outokumpu Oyj Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Steel Dynamics and Outokumpu Oyj
The main advantage of trading using opposite Steel Dynamics and Outokumpu Oyj positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics position performs unexpectedly, Outokumpu Oyj 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 Outokumpu Oyj will offset losses from the drop in Outokumpu Oyj's long position.| Steel Dynamics vs. Cleveland Cliffs | Steel Dynamics vs. United States Steel | Steel Dynamics vs. Reliance Steel Aluminum | Steel Dynamics vs. Nucor Corp |
| Outokumpu Oyj vs. Olympic Steel | Outokumpu Oyj vs. Mesabi Trust | Outokumpu Oyj vs. Universal Stainless Alloy | Outokumpu Oyj vs. POSCO Holdings |
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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