Correlation Between Steel Dynamics and Prudential Day
Can any of the company-specific risk be diversified away by investing in both Steel Dynamics and Prudential Day 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 Prudential Day into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Dynamics and Prudential Day One, you can compare the effects of market volatilities on Steel Dynamics and Prudential Day 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 Prudential Day. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and Prudential Day.
Diversification Opportunities for Steel Dynamics and Prudential Day
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between Steel and Prudential is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and Prudential Day One in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Day One 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 Prudential Day. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Day One has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and Prudential Day go up and down completely randomly.
Pair Corralation between Steel Dynamics and Prudential Day
Given the investment horizon of 90 days Steel Dynamics is expected to generate 12.18 times more return on investment than Prudential Day. However, Steel Dynamics is 12.18 times more volatile than Prudential Day One. It trades about 0.14 of its potential returns per unit of risk. Prudential Day One is currently generating about 0.32 per unit of risk. If you would invest 13,358 in Steel Dynamics on September 3, 2024 and sell it today you would earn a total of 1,169 from holding Steel Dynamics or generate 8.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Steel Dynamics vs. Prudential Day One
Performance |
| Timeline |
| Steel Dynamics |
| Prudential Day One |
Steel Dynamics and Prudential Day Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Steel Dynamics and Prudential Day
The main advantage of trading using opposite Steel Dynamics and Prudential Day positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics position performs unexpectedly, Prudential Day 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 Prudential Day will offset losses from the drop in Prudential Day'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 |
| Prudential Day vs. Amg Managers Centersquare | Prudential Day vs. Pender Real Estate | Prudential Day vs. Franklin Real Estate | Prudential Day vs. Columbia Real Estate |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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