Correlation Between Steel Dynamics and 44107TAV8

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Can any of the company-specific risk be diversified away by investing in both Steel Dynamics and 44107TAV8 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 44107TAV8 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Dynamics and HOST HOTELS RESORTS, you can compare the effects of market volatilities on Steel Dynamics and 44107TAV8 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 44107TAV8. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and 44107TAV8.

Diversification Opportunities for Steel Dynamics and 44107TAV8

0.02
  Correlation Coefficient

Significant diversification

The 3 months correlation between Steel and 44107TAV8 is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and HOST HOTELS RESORTS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HOST HOTELS RESORTS 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 44107TAV8. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HOST HOTELS RESORTS has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and 44107TAV8 go up and down completely randomly.

Pair Corralation between Steel Dynamics and 44107TAV8

Given the investment horizon of 90 days Steel Dynamics is expected to generate 7.89 times more return on investment than 44107TAV8. However, Steel Dynamics is 7.89 times more volatile than HOST HOTELS RESORTS. It trades about 0.06 of its potential returns per unit of risk. HOST HOTELS RESORTS is currently generating about 0.02 per unit of risk. If you would invest  11,317  in Steel Dynamics on September 4, 2024 and sell it today you would earn a total of  3,164  from holding Steel Dynamics or generate 27.96% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy87.85%
ValuesDaily Returns

Steel Dynamics  vs.  HOST HOTELS RESORTS

 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.
HOST HOTELS RESORTS 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days HOST HOTELS RESORTS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 44107TAV8 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Steel Dynamics and 44107TAV8 Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Steel Dynamics and 44107TAV8

The main advantage of trading using opposite Steel Dynamics and 44107TAV8 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics position performs unexpectedly, 44107TAV8 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 44107TAV8 will offset losses from the drop in 44107TAV8's long position.
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The idea behind Steel Dynamics and HOST HOTELS RESORTS 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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