Correlation Between Steel Dynamics and Federated Pennsylvania
Can any of the company-specific risk be diversified away by investing in both Steel Dynamics and Federated Pennsylvania 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 Federated Pennsylvania into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Dynamics and Federated Pennsylvania Municipal, you can compare the effects of market volatilities on Steel Dynamics and Federated Pennsylvania 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 Federated Pennsylvania. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and Federated Pennsylvania.
Diversification Opportunities for Steel Dynamics and Federated Pennsylvania
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Steel and FEDERATED is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and Federated Pennsylvania Municip in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Pennsylvania 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 Federated Pennsylvania. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Pennsylvania has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and Federated Pennsylvania go up and down completely randomly.
Pair Corralation between Steel Dynamics and Federated Pennsylvania
Given the investment horizon of 90 days Steel Dynamics is expected to generate 11.26 times more return on investment than Federated Pennsylvania. However, Steel Dynamics is 11.26 times more volatile than Federated Pennsylvania Municipal. It trades about 0.04 of its potential returns per unit of risk. Federated Pennsylvania Municipal is currently generating about 0.11 per unit of risk. If you would invest 13,163 in Steel Dynamics on September 3, 2024 and sell it today you would earn a total of 1,364 from holding Steel Dynamics or generate 10.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Steel Dynamics vs. Federated Pennsylvania Municip
Performance |
| Timeline |
| Steel Dynamics |
| Federated Pennsylvania |
Steel Dynamics and Federated Pennsylvania Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Steel Dynamics and Federated Pennsylvania
The main advantage of trading using opposite Steel Dynamics and Federated Pennsylvania positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics position performs unexpectedly, Federated Pennsylvania 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 Federated Pennsylvania will offset losses from the drop in Federated Pennsylvania'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 |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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