Correlation Between Steel Dynamics and Invesco Small
Can any of the company-specific risk be diversified away by investing in both Steel Dynamics and Invesco Small 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 Invesco Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Dynamics and Invesco Small Cap, you can compare the effects of market volatilities on Steel Dynamics and Invesco Small 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 Invesco Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and Invesco Small.
Diversification Opportunities for Steel Dynamics and Invesco Small
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Steel and Invesco is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and Invesco Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Small Cap 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 Invesco Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Small Cap has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and Invesco Small go up and down completely randomly.
Pair Corralation between Steel Dynamics and Invesco Small
Given the investment horizon of 90 days Steel Dynamics is expected to generate 1.89 times more return on investment than Invesco Small. However, Steel Dynamics is 1.89 times more volatile than Invesco Small Cap. It trades about 0.04 of its potential returns per unit of risk. Invesco Small Cap is currently generating about 0.06 per unit of risk. If you would invest 10,552 in Steel Dynamics on September 4, 2024 and sell it today you would earn a total of 3,929 from holding Steel Dynamics or generate 37.23% 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. Invesco Small Cap
Performance |
| Timeline |
| Steel Dynamics |
| Invesco Small Cap |
Steel Dynamics and Invesco Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Steel Dynamics and Invesco Small
The main advantage of trading using opposite Steel Dynamics and Invesco Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics position performs unexpectedly, Invesco Small 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 Invesco Small will offset losses from the drop in Invesco Small'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 |
| Invesco Small vs. Qs Large Cap | Invesco Small vs. Transamerica Large Cap | Invesco Small vs. Dunham Large Cap | Invesco Small vs. Dodge Cox Stock |
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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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