Correlation Between Steel Dynamics and Select International
Can any of the company-specific risk be diversified away by investing in both Steel Dynamics and Select International 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 Select International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Dynamics and Select International Equity, you can compare the effects of market volatilities on Steel Dynamics and Select International 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 Select International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and Select International.
Diversification Opportunities for Steel Dynamics and Select International
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Steel and Select is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and Select International Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Select International 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 Select International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Select International has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and Select International go up and down completely randomly.
Pair Corralation between Steel Dynamics and Select International
Given the investment horizon of 90 days Steel Dynamics is expected to generate 3.98 times more return on investment than Select International. However, Steel Dynamics is 3.98 times more volatile than Select International Equity. It trades about 0.12 of its potential returns per unit of risk. Select International Equity is currently generating about -0.11 per unit of risk. If you would invest 12,822 in Steel Dynamics on September 4, 2024 and sell it today you would earn a total of 1,659 from holding Steel Dynamics or generate 12.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 97.62% |
| Values | Daily Returns |
Steel Dynamics vs. Select International Equity
Performance |
| Timeline |
| Steel Dynamics |
| Select International |
Steel Dynamics and Select International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Steel Dynamics and Select International
The main advantage of trading using opposite Steel Dynamics and Select International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics position performs unexpectedly, Select International 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 Select International will offset losses from the drop in Select International'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 |
| Select International vs. International Developed Markets | Select International vs. Global Real Estate | Select International vs. Global Real Estate | Select International vs. Global 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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