Correlation Between Steel Dynamics and FIREWEED METALS

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

By analyzing existing cross correlation between Steel Dynamics and FIREWEED METALS P, you can compare the effects of market volatilities on Steel Dynamics and FIREWEED METALS 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 FIREWEED METALS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and FIREWEED METALS.

Diversification Opportunities for Steel Dynamics and FIREWEED METALS

0.19

Correlation Coefficient

Steel Dynamics  FIREWEED METALS

Average diversification

The 3 months correlation between Steel and FIREWEED is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and FIREWEED METALS P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FIREWEED METALS P 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 FIREWEED METALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FIREWEED METALS P has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and FIREWEED METALS go up and down completely randomly.

Pair Corralation between Steel Dynamics and FIREWEED METALS

Assuming the 90 days horizon Steel Dynamics is expected to generate 0.93 times more return on investment than FIREWEED METALS. However, Steel Dynamics is 1.08 times less risky than FIREWEED METALS. It trades about 0.19 of its potential returns per unit of risk. FIREWEED METALS P is currently generating about 0.02 per unit of risk. If you would invest  10,132  in Steel Dynamics on September 4, 2024 and sell it today you would earn a total of  3,344  from holding Steel Dynamics or generate 33.0% return on investment over 90 days.

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

Steel Dynamics  vs.  FIREWEED METALS P

Steel Dynamics

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Steel Dynamics are ranked lower than 15 (%) 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.

FIREWEED METALS P

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in FIREWEED METALS P are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, FIREWEED METALS is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Steel Dynamics and FIREWEED METALS

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

The idea behind Steel Dynamics and FIREWEED METALS P 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.