Correlation Between Steel Dynamics and 08949LAB6

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Can any of the company-specific risk be diversified away by investing in both Steel Dynamics and 08949LAB6 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 08949LAB6 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Dynamics and BIG RIV STL, you can compare the effects of market volatilities on Steel Dynamics and 08949LAB6 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 08949LAB6. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and 08949LAB6.

Diversification Opportunities for Steel Dynamics and 08949LAB6

-0.15
  Correlation Coefficient

Good diversification

The 3 months correlation between Steel and 08949LAB6 is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and BIG RIV STL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BIG RIV STL 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 08949LAB6. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BIG RIV STL has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and 08949LAB6 go up and down completely randomly.

Pair Corralation between Steel Dynamics and 08949LAB6

Given the investment horizon of 90 days Steel Dynamics is expected to generate 4.23 times more return on investment than 08949LAB6. However, Steel Dynamics is 4.23 times more volatile than BIG RIV STL. It trades about 0.06 of its potential returns per unit of risk. BIG RIV STL is currently generating about 0.01 per unit of risk. If you would invest  12,460  in Steel Dynamics on September 5, 2024 and sell it today you would earn a total of  1,860  from holding Steel Dynamics or generate 14.93% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy76.8%
ValuesDaily Returns

Steel Dynamics  vs.  BIG RIV STL

 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.
BIG RIV STL 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days BIG RIV STL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 08949LAB6 is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Steel Dynamics and 08949LAB6 Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Steel Dynamics and 08949LAB6

The main advantage of trading using opposite Steel Dynamics and 08949LAB6 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics position performs unexpectedly, 08949LAB6 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 08949LAB6 will offset losses from the drop in 08949LAB6's long position.
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The idea behind Steel Dynamics and BIG RIV STL 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.

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