Correlation Between Perma-Fix Environmental and Steel Dynamics

Can any of the company-specific risk be diversified away by investing in both Perma-Fix Environmental and Steel Dynamics 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 Perma-Fix Environmental and Steel Dynamics into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Perma Fix Environmental Services and Steel Dynamics, you can compare the effects of market volatilities on Perma-Fix Environmental and Steel Dynamics 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 Perma-Fix Environmental with a short position of Steel Dynamics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Perma-Fix Environmental and Steel Dynamics.

Diversification Opportunities for Perma-Fix Environmental and Steel Dynamics

0.92

Correlation Coefficient

Perma-Fix Environmental  Steel Dynamics

Almost no diversification

The 3 months correlation between Perma-Fix and Steel is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Perma Fix Environmental Servic and Steel Dynamics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steel Dynamics and Perma-Fix Environmental 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 Perma Fix Environmental Services are associated (or correlated) with Steel Dynamics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Steel Dynamics has no effect on the direction of Perma-Fix Environmental i.e., Perma-Fix Environmental and Steel Dynamics go up and down completely randomly.

Pair Corralation between Perma-Fix Environmental and Steel Dynamics

Assuming the 90 days trading horizon Perma Fix Environmental Services is expected to generate 1.49 times more return on investment than Steel Dynamics. However, Perma-Fix Environmental is 1.49 times more volatile than Steel Dynamics. It trades about 0.15 of its potential returns per unit of risk. Steel Dynamics is currently generating about 0.16 per unit of risk. If you would invest  985.00  in Perma Fix Environmental Services on September 3, 2024 and sell it today you would earn a total of  365.00  from holding Perma Fix Environmental Services or generate 37.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Perma Fix Environmental Servic  vs.  Steel Dynamics

Perma Fix Environmental

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Perma Fix Environmental Services are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Perma-Fix Environmental reported solid returns over the last few months and may actually be approaching a breakup point.

Steel Dynamics

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Steel Dynamics are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Steel Dynamics reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Perma-Fix Environmental and Steel Dynamics

The main advantage of trading using opposite Perma-Fix Environmental and Steel Dynamics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Perma-Fix Environmental position performs unexpectedly, Steel Dynamics 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 Steel Dynamics will offset losses from the drop in Steel Dynamics' long position.

The idea behind Perma Fix Environmental Services and Steel Dynamics 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.

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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.