Correlation Between Steel Dynamics and NFT

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

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

Diversification Opportunities for Steel Dynamics and NFT

0.14

Correlation Coefficient

Steel Dynamics  NFT

Average diversification

The 3 months correlation between Steel and NFT is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and NFT Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NFT Limited 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 NFT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NFT Limited has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and NFT go up and down completely randomly.

Pair Corralation between Steel Dynamics and NFT

Given the investment horizon of 90 days Steel Dynamics is expected to generate 3.05 times less return on investment than NFT. But when comparing it to its historical volatility, Steel Dynamics is 4.97 times less risky than NFT. It trades about 0.17 of its potential returns per unit of risk. NFT Limited is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  369.00  in NFT Limited on September 3, 2024 and sell it today you would earn a total of  55.00  from holding NFT Limited or generate 14.91% 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.  NFT Limited

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.

NFT Limited

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NFT Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain forward indicators, NFT demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Steel Dynamics and NFT

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

The idea behind Steel Dynamics and NFT 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.

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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.