Correlation Between Steel Dynamics and Monachil Credit

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

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

Diversification Opportunities for Steel Dynamics and Monachil Credit

0.86

Correlation Coefficient

Steel Dynamics  Monachil Credit

Very poor diversification

The 3 months correlation between Steel and Monachil is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and Monachil Credit Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monachil Credit Income 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 Monachil Credit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Monachil Credit Income has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and Monachil Credit go up and down completely randomly.

Pair Corralation between Steel Dynamics and Monachil Credit

Given the investment horizon of 90 days Steel Dynamics is expected to under-perform the Monachil Credit. In addition to that, Steel Dynamics is 6.13 times more volatile than Monachil Credit Income. It trades about -0.29 of its total potential returns per unit of risk. Monachil Credit Income is currently generating about -0.06 per unit of volatility. If you would invest  1,010  in Monachil Credit Income on September 12, 2024 and sell it today you would lose (3.00) from holding Monachil Credit Income or give up 0.3% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.45%
Values	Daily Returns

Steel Dynamics  vs.  Monachil Credit Income

Steel Dynamics

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Steel Dynamics are ranked lower than 11 (%) 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.

Monachil Credit Income

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Monachil Credit Income are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Monachil Credit is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Steel Dynamics and Monachil Credit

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

The idea behind Steel Dynamics and Monachil Credit Income 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.