Correlation Between Steel Dynamics and Beowulf Mining

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

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

Diversification Opportunities for Steel Dynamics and Beowulf Mining

-0.9

Correlation Coefficient

Steel Dynamics  Beowulf Mining

Pay attention - limited upside

The 3 months correlation between Steel and Beowulf is -0.9. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and Beowulf Mining PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beowulf Mining PLC 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 Beowulf Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beowulf Mining PLC has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and Beowulf Mining go up and down completely randomly.

Pair Corralation between Steel Dynamics and Beowulf Mining

Given the investment horizon of 90 days Steel Dynamics is expected to generate 19.05 times less return on investment than Beowulf Mining. But when comparing it to its historical volatility, Steel Dynamics is 20.65 times less risky than Beowulf Mining. It trades about 0.04 of its potential returns per unit of risk. Beowulf Mining PLC is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  54.00  in Beowulf Mining PLC on September 4, 2024 and sell it today you would earn a total of  152.00  from holding Beowulf Mining PLC or generate 281.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	99.4%
Values	Daily Returns

Steel Dynamics  vs.  Beowulf Mining PLC

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.

Beowulf Mining PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Beowulf Mining PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Steel Dynamics and Beowulf Mining

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

The idea behind Steel Dynamics and Beowulf Mining PLC 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.