Correlation Between Steel Dynamics and Aperam SA
Can any of the company-specific risk be diversified away by investing in both Steel Dynamics and Aperam SA 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 Aperam SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Dynamics and Aperam SA, you can compare the effects of market volatilities on Steel Dynamics and Aperam SA 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 Aperam SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and Aperam SA.
Diversification Opportunities for Steel Dynamics and Aperam SA
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Steel and Aperam is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and Aperam SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aperam SA 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 Aperam SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aperam SA has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and Aperam SA go up and down completely randomly.
Pair Corralation between Steel Dynamics and Aperam SA
Assuming the 90 days horizon Steel Dynamics is expected to generate 1.43 times more return on investment than Aperam SA. However, Steel Dynamics is 1.43 times more volatile than Aperam SA. It trades about 0.2 of its potential returns per unit of risk. Aperam SA is currently generating about 0.2 per unit of risk. If you would invest 9,678 in Steel Dynamics on September 12, 2024 and sell it today you would earn a total of 3,270 from holding Steel Dynamics or generate 33.79% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Steel Dynamics vs. Aperam SA
Performance |
Timeline |
Steel Dynamics |
Aperam SA |
Steel Dynamics and Aperam SA Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Steel Dynamics and Aperam SA
The main advantage of trading using opposite Steel Dynamics and Aperam SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics position performs unexpectedly, Aperam SA 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 Aperam SA will offset losses from the drop in Aperam SA's long position.Steel Dynamics vs. ArcelorMittal | Steel Dynamics vs. NIPPON STEEL SPADR | Steel Dynamics vs. Reliance Steel Aluminum | Steel Dynamics vs. Superior Plus Corp |
Aperam SA vs. Gladstone Investment | Aperam SA vs. AIR PRODCHEMICALS | Aperam SA vs. Clearside Biomedical | Aperam SA vs. IMAGIN MEDICAL INC |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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