Correlation Between Steel Dynamics and Soluna Holdings

Can any of the company-specific risk be diversified away by investing in both Steel Dynamics and Soluna 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 Soluna 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 Soluna Holdings, you can compare the effects of market volatilities on Steel Dynamics and Soluna 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 Soluna Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and Soluna Holdings.

Diversification Opportunities for Steel Dynamics and Soluna Holdings

0.38

Correlation Coefficient

Steel Dynamics  Soluna Holdings

Weak diversification

The 3 months correlation between Steel and Soluna is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and Soluna Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Soluna 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 Soluna Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Soluna Holdings has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and Soluna Holdings go up and down completely randomly.

Pair Corralation between Steel Dynamics and Soluna Holdings

Given the investment horizon of 90 days Steel Dynamics is expected to generate 1.26 times less return on investment than Soluna Holdings. But when comparing it to its historical volatility, Steel Dynamics is 3.1 times less risky than Soluna Holdings. It trades about 0.14 of its potential returns per unit of risk. Soluna Holdings is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  287.00  in Soluna Holdings on September 12, 2024 and sell it today you would earn a total of  31.00  from holding Soluna Holdings or generate 10.8% return on investment over 90 days.

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

Steel Dynamics  vs.  Soluna Holdings

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.

Soluna Holdings

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Soluna Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Soluna Holdings demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Steel Dynamics and Soluna Holdings

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

The idea behind Steel Dynamics and Soluna 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.