Correlation Between Steel Dynamics and 842400HT3

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Can any of the company-specific risk be diversified away by investing in both Steel Dynamics and 842400HT3 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 842400HT3 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Dynamics and EIX 595 01 NOV 32, you can compare the effects of market volatilities on Steel Dynamics and 842400HT3 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 842400HT3. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and 842400HT3.

Diversification Opportunities for Steel Dynamics and 842400HT3

-0.76
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Steel and 842400HT3 is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and EIX 595 01 NOV 32 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EIX 595 01 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 842400HT3. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EIX 595 01 has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and 842400HT3 go up and down completely randomly.

Pair Corralation between Steel Dynamics and 842400HT3

Given the investment horizon of 90 days Steel Dynamics is expected to generate 8.66 times more return on investment than 842400HT3. However, Steel Dynamics is 8.66 times more volatile than EIX 595 01 NOV 32. It trades about 0.14 of its potential returns per unit of risk. EIX 595 01 NOV 32 is currently generating about 0.1 per unit of risk. If you would invest  13,358  in Steel Dynamics on September 3, 2024 and sell it today you would earn a total of  1,169  from holding Steel Dynamics or generate 8.75% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy95.0%
ValuesDaily Returns

Steel Dynamics  vs.  EIX 595 01 NOV 32

 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.
EIX 595 01 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days EIX 595 01 NOV 32 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 842400HT3 is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Steel Dynamics and 842400HT3 Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Steel Dynamics and 842400HT3

The main advantage of trading using opposite Steel Dynamics and 842400HT3 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics position performs unexpectedly, 842400HT3 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 842400HT3 will offset losses from the drop in 842400HT3's long position.
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The idea behind Steel Dynamics and EIX 595 01 NOV 32 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.

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