Correlation Between Steel Dynamics and Globalstar

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

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

Diversification Opportunities for Steel Dynamics and Globalstar

0.7

Correlation Coefficient

Steel Dynamics  Globalstar

Poor diversification

The 3 months correlation between Steel and Globalstar is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and Globalstar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Globalstar 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 Globalstar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Globalstar has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and Globalstar go up and down completely randomly.

Pair Corralation between Steel Dynamics and Globalstar

Given the investment horizon of 90 days Steel Dynamics is expected to generate 2.29 times less return on investment than Globalstar. But when comparing it to its historical volatility, Steel Dynamics is 2.65 times less risky than Globalstar. It trades about 0.17 of its potential returns per unit of risk. Globalstar is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  128.00  in Globalstar on September 4, 2024 and sell it today you would earn a total of  82.00  from holding Globalstar or generate 64.06% return on investment over 90 days.

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

Steel Dynamics  vs.  Globalstar

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.

Globalstar

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Globalstar are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, Globalstar unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Steel Dynamics and Globalstar

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

The idea behind Steel Dynamics and Globalstar 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.