Correlation Between Steel Dynamics and Demant AS
Can any of the company-specific risk be diversified away by investing in both Steel Dynamics and Demant AS 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 Demant AS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Dynamics and Demant AS ADR, you can compare the effects of market volatilities on Steel Dynamics and Demant AS 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 Demant AS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and Demant AS.
Diversification Opportunities for Steel Dynamics and Demant AS
-0.92 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Steel and Demant is -0.92. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and Demant AS ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Demant AS ADR 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 Demant AS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Demant AS ADR has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and Demant AS go up and down completely randomly.
Pair Corralation between Steel Dynamics and Demant AS
Given the investment horizon of 90 days Steel Dynamics is expected to generate 101.57 times more return on investment than Demant AS. However, Steel Dynamics is 101.57 times more volatile than Demant AS ADR. It trades about 0.09 of its potential returns per unit of risk. Demant AS ADR is currently generating about -0.21 per unit of risk. If you would invest 13,572 in Steel Dynamics on August 29, 2024 and sell it today you would earn a total of 811.00 from holding Steel Dynamics or generate 5.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Steel Dynamics vs. Demant AS ADR
Performance |
| Timeline |
| Steel Dynamics |
| Demant AS ADR |
Steel Dynamics and Demant AS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Steel Dynamics and Demant AS
The main advantage of trading using opposite Steel Dynamics and Demant AS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics position performs unexpectedly, Demant AS 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 Demant AS will offset losses from the drop in Demant AS'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 |
| Demant AS vs. CochLear Ltd ADR | Demant AS vs. GN Store Nord | Demant AS vs. GN Store Nord | Demant AS vs. Siemens Healthineers AG |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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