Correlation Between Steel Dynamics and Malacca Straits
Can any of the company-specific risk be diversified away by investing in both Steel Dynamics and Malacca Straits 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 Malacca Straits into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Dynamics and Malacca Straits Acquisition, you can compare the effects of market volatilities on Steel Dynamics and Malacca Straits 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 Malacca Straits. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and Malacca Straits.
Diversification Opportunities for Steel Dynamics and Malacca Straits
-0.67 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Steel and Malacca is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and Malacca Straits Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Malacca Straits Acqu 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 Malacca Straits. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Malacca Straits Acqu has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and Malacca Straits go up and down completely randomly.
Pair Corralation between Steel Dynamics and Malacca Straits
If you would invest 11,034 in Steel Dynamics on September 8, 2024 and sell it today you would earn a total of 2,656 from holding Steel Dynamics or generate 24.07% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 1.54% |
Values | Daily Returns |
Steel Dynamics vs. Malacca Straits Acquisition
Performance |
Timeline |
Steel Dynamics |
Malacca Straits Acqu |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Steel Dynamics and Malacca Straits Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Steel Dynamics and Malacca Straits
The main advantage of trading using opposite Steel Dynamics and Malacca Straits positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics position performs unexpectedly, Malacca Straits 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 Malacca Straits will offset losses from the drop in Malacca Straits' long position.Steel Dynamics vs. Cleveland Cliffs | Steel Dynamics vs. United States Steel | Steel Dynamics vs. ArcelorMittal SA ADR | Steel Dynamics vs. Reliance Steel Aluminum |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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