Correlation Between Steel Dynamics and Unicharm Corp

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Can any of the company-specific risk be diversified away by investing in both Steel Dynamics and Unicharm Corp 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 Unicharm Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Dynamics and Unicharm Corp, you can compare the effects of market volatilities on Steel Dynamics and Unicharm Corp 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 Unicharm Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and Unicharm Corp.

Diversification Opportunities for Steel Dynamics and Unicharm Corp

-0.82
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Steel and Unicharm is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and Unicharm Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Unicharm Corp 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 Unicharm Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Unicharm Corp has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and Unicharm Corp go up and down completely randomly.

Pair Corralation between Steel Dynamics and Unicharm Corp

Given the investment horizon of 90 days Steel Dynamics is expected to generate 1.25 times more return on investment than Unicharm Corp. However, Steel Dynamics is 1.25 times more volatile than Unicharm Corp. It trades about 0.17 of its potential returns per unit of risk. Unicharm Corp is currently generating about -0.25 per unit of risk. If you would invest  11,271  in Steel Dynamics on September 4, 2024 and sell it today you would earn a total of  3,210  from holding Steel Dynamics or generate 28.48% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Steel Dynamics  vs.  Unicharm Corp

 Performance 
       Timeline  
Steel Dynamics 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Steel Dynamics are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile essential indicators, Steel Dynamics exhibited solid returns over the last few months and may actually be approaching a breakup point.
Unicharm Corp 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Unicharm Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Steel Dynamics and Unicharm Corp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Steel Dynamics and Unicharm Corp

The main advantage of trading using opposite Steel Dynamics and Unicharm Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics position performs unexpectedly, Unicharm Corp 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 Unicharm Corp will offset losses from the drop in Unicharm Corp's long position.
The idea behind Steel Dynamics and Unicharm Corp 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.
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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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.

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