Correlation Between Steel Dynamics and Thermal Energy
Can any of the company-specific risk be diversified away by investing in both Steel Dynamics and Thermal Energy 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 Thermal Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Dynamics and Thermal Energy International, you can compare the effects of market volatilities on Steel Dynamics and Thermal Energy 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 Thermal Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and Thermal Energy.
Diversification Opportunities for Steel Dynamics and Thermal Energy
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Steel and Thermal is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and Thermal Energy International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thermal Energy Inter 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 Thermal Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thermal Energy Inter has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and Thermal Energy go up and down completely randomly.
Pair Corralation between Steel Dynamics and Thermal Energy
Given the investment horizon of 90 days Steel Dynamics is expected to under-perform the Thermal Energy. But the stock apears to be less risky and, when comparing its historical volatility, Steel Dynamics is 3.6 times less risky than Thermal Energy. The stock trades about -0.3 of its potential returns per unit of risk. The Thermal Energy International is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest 15.00 in Thermal Energy International on September 12, 2024 and sell it today you would lose (1.00) from holding Thermal Energy International or give up 6.67% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Steel Dynamics vs. Thermal Energy International
Performance |
| Timeline |
| Steel Dynamics |
| Thermal Energy Inter |
Steel Dynamics and Thermal Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Steel Dynamics and Thermal Energy
The main advantage of trading using opposite Steel Dynamics and Thermal Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics position performs unexpectedly, Thermal Energy 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 Thermal Energy will offset losses from the drop in Thermal Energy'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 |
| Thermal Energy vs. QYOU Media | Thermal Energy vs. LeanLife Health | Thermal Energy vs. Prime Meridian Holding | Thermal Energy vs. TrackX 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 Stocks Directory module to find actively traded stocks across global markets.
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