Correlation Between Steel Dynamics and Peabody Energy
Can any of the company-specific risk be diversified away by investing in both Steel Dynamics and Peabody Energy 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 Peabody Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Dynamics and Peabody Energy, you can compare the effects of market volatilities on Steel Dynamics and Peabody Energy 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 Peabody Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and Peabody Energy.
Diversification Opportunities for Steel Dynamics and Peabody Energy
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Steel and Peabody is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and Peabody Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Peabody Energy 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 Peabody Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Peabody Energy has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and Peabody Energy go up and down completely randomly.
Pair Corralation between Steel Dynamics and Peabody Energy
Given the investment horizon of 90 days Steel Dynamics is expected to generate 0.87 times more return on investment than Peabody Energy. However, Steel Dynamics is 1.15 times less risky than Peabody Energy. It trades about 0.04 of its potential returns per unit of risk. Peabody Energy is currently generating about 0.0 per unit of risk. If you would invest 10,719 in Steel Dynamics on September 3, 2024 and sell it today you would earn a total of 3,808 from holding Steel Dynamics or generate 35.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 98.02% |
| Values | Daily Returns |
Steel Dynamics vs. Peabody Energy
Performance |
| Timeline |
| Steel Dynamics |
| Peabody Energy |
Steel Dynamics and Peabody Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Steel Dynamics and Peabody Energy
The main advantage of trading using opposite Steel Dynamics and Peabody Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics position performs unexpectedly, Peabody Energy 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 Peabody Energy will offset losses from the drop in Peabody Energy'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 |
| Peabody Energy vs. American Eagle Outfitters | Peabody Energy vs. CECO ENVIRONMENTAL | Peabody Energy vs. BlueScope Steel Limited | Peabody Energy vs. Grand Canyon Education |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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