Correlation Between Steel Dynamics and ClearVue Technologies

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

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

Diversification Opportunities for Steel Dynamics and ClearVue Technologies

-0.26

Correlation Coefficient

Steel Dynamics  ClearVue Technologies

Very good diversification

The 3 months correlation between Steel and ClearVue is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and ClearVue Technologies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ClearVue Technologies 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 ClearVue Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ClearVue Technologies has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and ClearVue Technologies go up and down completely randomly.

Pair Corralation between Steel Dynamics and ClearVue Technologies

Given the investment horizon of 90 days Steel Dynamics is expected to generate 28.94 times less return on investment than ClearVue Technologies. But when comparing it to its historical volatility, Steel Dynamics is 21.36 times less risky than ClearVue Technologies. It trades about 0.04 of its potential returns per unit of risk. ClearVue Technologies Limited is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  11.00  in ClearVue Technologies Limited on September 11, 2024 and sell it today you would earn a total of  6.00  from holding ClearVue Technologies Limited or generate 54.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Steel Dynamics  vs.  ClearVue Technologies Limited

Steel Dynamics

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Steel Dynamics are ranked lower than 12 (%) 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.

ClearVue Technologies

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ClearVue Technologies Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, ClearVue Technologies reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Steel Dynamics and ClearVue Technologies

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

The idea behind Steel Dynamics and ClearVue Technologies Limited 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.