Correlation Between Steel Dynamics and American Beacon
Can any of the company-specific risk be diversified away by investing in both Steel Dynamics and American Beacon 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 American Beacon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Dynamics and American Beacon Shapiro, you can compare the effects of market volatilities on Steel Dynamics and American Beacon 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 American Beacon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and American Beacon.
Diversification Opportunities for Steel Dynamics and American Beacon
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Steel and American is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and American Beacon Shapiro in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Beacon Shapiro 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 American Beacon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Beacon Shapiro has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and American Beacon go up and down completely randomly.
Pair Corralation between Steel Dynamics and American Beacon
Given the investment horizon of 90 days Steel Dynamics is expected to under-perform the American Beacon. In addition to that, Steel Dynamics is 2.17 times more volatile than American Beacon Shapiro. It trades about -0.3 of its total potential returns per unit of risk. American Beacon Shapiro is currently generating about -0.15 per unit of volatility. If you would invest 1,462 in American Beacon Shapiro on September 12, 2024 and sell it today you would lose (31.00) from holding American Beacon Shapiro or give up 2.12% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Steel Dynamics vs. American Beacon Shapiro
Performance |
| Timeline |
| Steel Dynamics |
| American Beacon Shapiro |
Steel Dynamics and American Beacon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Steel Dynamics and American Beacon
The main advantage of trading using opposite Steel Dynamics and American Beacon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics position performs unexpectedly, American Beacon 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 American Beacon will offset losses from the drop in American Beacon'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 |
| American Beacon vs. Fidelity Advisor Diversified | American Beacon vs. Federated Hermes Conservative | American Beacon vs. Guggenheim Diversified Income | American Beacon vs. Aqr Diversified Arbitrage |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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