Correlation Between Steel Dynamics and Gordon Auto

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

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

Diversification Opportunities for Steel Dynamics and Gordon Auto

0.83

Correlation Coefficient

Steel Dynamics  Gordon Auto

Very poor diversification

The 3 months correlation between Steel and Gordon is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and Gordon Auto Body in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gordon Auto Body 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 Gordon Auto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gordon Auto Body has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and Gordon Auto go up and down completely randomly.

Pair Corralation between Steel Dynamics and Gordon Auto

Given the investment horizon of 90 days Steel Dynamics is expected to generate 1.01 times less return on investment than Gordon Auto. In addition to that, Steel Dynamics is 1.05 times more volatile than Gordon Auto Body. It trades about 0.17 of its total potential returns per unit of risk. Gordon Auto Body is currently generating about 0.18 per unit of volatility. If you would invest  3,060  in Gordon Auto Body on September 3, 2024 and sell it today you would earn a total of  855.00  from holding Gordon Auto Body or generate 27.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

Steel Dynamics  vs.  Gordon Auto Body

Steel Dynamics

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Steel Dynamics are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile essential indicators, Steel Dynamics exhibited solid returns over the last few months and may actually be approaching a breakup point.

Gordon Auto Body

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gordon Auto Body are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Gordon Auto showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Steel Dynamics and Gordon Auto

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

The idea behind Steel Dynamics and Gordon Auto Body 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.