Correlation Between Steel Dynamics and Kaya Holdings

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

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

Diversification Opportunities for Steel Dynamics and Kaya Holdings

-0.7

Correlation Coefficient

Steel Dynamics  Kaya Holdings

Excellent diversification

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

Pair Corralation between Steel Dynamics and Kaya Holdings

Given the investment horizon of 90 days Steel Dynamics is expected to generate 2.93 times less return on investment than Kaya Holdings. But when comparing it to its historical volatility, Steel Dynamics is 5.03 times less risky than Kaya Holdings. It trades about 0.06 of its potential returns per unit of risk. Kaya Holdings is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  4.94  in Kaya Holdings on September 3, 2024 and sell it today you would lose (1.14) from holding Kaya Holdings or give up 23.08% of portfolio value over 90 days.

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

Steel Dynamics  vs.  Kaya Holdings

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.

Kaya Holdings

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kaya Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Kaya Holdings unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Steel Dynamics and Kaya Holdings

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

The idea behind Steel Dynamics and Kaya Holdings 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.