Correlation Between Steel Dynamics and Victory Munder

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

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

Diversification Opportunities for Steel Dynamics and Victory Munder

0.87

Correlation Coefficient

Steel Dynamics  Victory Munder

Very poor diversification

The 3 months correlation between Steel and Victory is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and Victory Munder Multi Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Victory Munder Multi 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 Victory Munder. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Victory Munder Multi has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and Victory Munder go up and down completely randomly.

Pair Corralation between Steel Dynamics and Victory Munder

Given the investment horizon of 90 days Steel Dynamics is expected to generate 3.2 times more return on investment than Victory Munder. However, Steel Dynamics is 3.2 times more volatile than Victory Munder Multi Cap. It trades about 0.12 of its potential returns per unit of risk. Victory Munder Multi Cap is currently generating about 0.16 per unit of risk. If you would invest  11,243  in Steel Dynamics on September 13, 2024 and sell it today you would earn a total of  2,112  from holding Steel Dynamics or generate 18.79% return on investment over 90 days.

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

Steel Dynamics  vs.  Victory Munder Multi Cap

Steel Dynamics

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Steel Dynamics are ranked lower than 9 (%) 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.

Victory Munder Multi

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Victory Munder Multi Cap are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Victory Munder may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Steel Dynamics and Victory Munder

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

The idea behind Steel Dynamics and Victory Munder Multi Cap 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 Stocks Directory module to find actively traded stocks across global markets.