Correlation Between Steel Dynamics and Hwacom Systems

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

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

Diversification Opportunities for Steel Dynamics and Hwacom Systems

-0.41

Correlation Coefficient

Steel Dynamics  Hwacom Systems

Very good diversification

The 3 months correlation between Steel and Hwacom is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and Hwacom Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hwacom Systems 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 Hwacom Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hwacom Systems has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and Hwacom Systems go up and down completely randomly.

Pair Corralation between Steel Dynamics and Hwacom Systems

Given the investment horizon of 90 days Steel Dynamics is expected to generate 1.05 times more return on investment than Hwacom Systems. However, Steel Dynamics is 1.05 times more volatile than Hwacom Systems. It trades about 0.18 of its potential returns per unit of risk. Hwacom Systems is currently generating about 0.02 per unit of risk. If you would invest  11,091  in Steel Dynamics on September 5, 2024 and sell it today you would earn a total of  3,229  from holding Steel Dynamics or generate 29.11% return on investment over 90 days.

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

Steel Dynamics  vs.  Hwacom Systems

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.

Hwacom Systems

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hwacom Systems are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Hwacom Systems is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Steel Dynamics and Hwacom Systems

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

The idea behind Steel Dynamics and Hwacom Systems 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.