Correlation Between Grupo Simec and Steel Dynamics

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

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

Diversification Opportunities for Grupo Simec and Steel Dynamics

-0.29

Correlation Coefficient

Grupo Simec  Steel Dynamics

Very good diversification

The 3 months correlation between Grupo and Steel is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Simec SAB and Steel Dynamics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steel Dynamics and Grupo Simec 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 Grupo Simec SAB 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 Grupo Simec i.e., Grupo Simec and Steel Dynamics go up and down completely randomly.

Pair Corralation between Grupo Simec and Steel Dynamics

Assuming the 90 days trading horizon Grupo Simec SAB is expected to under-perform the Steel Dynamics. But the stock apears to be less risky and, when comparing its historical volatility, Grupo Simec SAB is 102.35 times less risky than Steel Dynamics. The stock trades about -0.08 of its potential returns per unit of risk. The Steel Dynamics is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  208,095  in Steel Dynamics on September 27, 2024 and sell it today you would earn a total of  94,972  from holding Steel Dynamics or generate 45.64% return on investment over 90 days.

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

Grupo Simec SAB  vs.  Steel Dynamics

Grupo Simec SAB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Grupo Simec SAB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong primary indicators, Grupo Simec is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Steel Dynamics

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Steel Dynamics are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Steel Dynamics showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Grupo Simec and Steel Dynamics

The main advantage of trading using opposite Grupo Simec and Steel Dynamics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grupo Simec 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 Grupo Simec SAB 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.

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