Correlation Between Steel Dynamics and GoviEx Uranium

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

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

Diversification Opportunities for Steel Dynamics and GoviEx Uranium

0.18

Correlation Coefficient

Steel Dynamics  GoviEx Uranium

Average diversification

The 3 months correlation between Steel and GoviEx is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and GoviEx Uranium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GoviEx Uranium 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 GoviEx Uranium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GoviEx Uranium has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and GoviEx Uranium go up and down completely randomly.

Pair Corralation between Steel Dynamics and GoviEx Uranium

Given the investment horizon of 90 days Steel Dynamics is expected to generate 2.26 times less return on investment than GoviEx Uranium. But when comparing it to its historical volatility, Steel Dynamics is 5.62 times less risky than GoviEx Uranium. It trades about 0.17 of its potential returns per unit of risk. GoviEx Uranium is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  5.50  in GoviEx Uranium on September 3, 2024 and sell it today you would earn a total of  0.25  from holding GoviEx Uranium or generate 4.55% return on investment over 90 days.

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

Steel Dynamics  vs.  GoviEx Uranium

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.

GoviEx Uranium

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in GoviEx Uranium are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, GoviEx Uranium showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Steel Dynamics and GoviEx Uranium

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

The idea behind Steel Dynamics and GoviEx Uranium 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.