Correlation Between Steel Dynamics and BluMetric Environmental
Can any of the company-specific risk be diversified away by investing in both Steel Dynamics and BluMetric Environmental 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 BluMetric Environmental into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Dynamics and BluMetric Environmental, you can compare the effects of market volatilities on Steel Dynamics and BluMetric Environmental 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 BluMetric Environmental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and BluMetric Environmental.
Diversification Opportunities for Steel Dynamics and BluMetric Environmental
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Steel and BluMetric is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and BluMetric Environmental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BluMetric Environmental 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 BluMetric Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BluMetric Environmental has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and BluMetric Environmental go up and down completely randomly.
Pair Corralation between Steel Dynamics and BluMetric Environmental
Given the investment horizon of 90 days Steel Dynamics is expected to generate 1.56 times less return on investment than BluMetric Environmental. But when comparing it to its historical volatility, Steel Dynamics is 1.3 times less risky than BluMetric Environmental. It trades about 0.09 of its potential returns per unit of risk. BluMetric Environmental is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 55.00 in BluMetric Environmental on August 29, 2024 and sell it today you would earn a total of 5.00 from holding BluMetric Environmental or generate 9.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Steel Dynamics vs. BluMetric Environmental
Performance |
| Timeline |
| Steel Dynamics |
| BluMetric Environmental |
Steel Dynamics and BluMetric Environmental Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Steel Dynamics and BluMetric Environmental
The main advantage of trading using opposite Steel Dynamics and BluMetric Environmental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics position performs unexpectedly, BluMetric Environmental 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 BluMetric Environmental will offset losses from the drop in BluMetric Environmental's long position.The idea behind Steel Dynamics and BluMetric Environmental pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| BluMetric Environmental vs. Republic Services | BluMetric Environmental vs. Waste Connections | BluMetric Environmental vs. Clean Harbors | BluMetric Environmental vs. Gfl Environmental 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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