Correlation Between Steel Dynamics and CBAAU

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

By analyzing existing cross correlation between Steel Dynamics and CBAAU 1125 15 JUN 26, you can compare the effects of market volatilities on Steel Dynamics and CBAAU 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 CBAAU. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and CBAAU.

Diversification Opportunities for Steel Dynamics and CBAAU

0.45

Correlation Coefficient

Steel Dynamics  CBAAU

Very weak diversification

The 3 months correlation between Steel and CBAAU is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and CBAAU 1125 15 JUN 26 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CBAAU 1125 15 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 CBAAU. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CBAAU 1125 15 has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and CBAAU go up and down completely randomly.

Pair Corralation between Steel Dynamics and CBAAU

Given the investment horizon of 90 days Steel Dynamics is expected to generate 3.9 times more return on investment than CBAAU. However, Steel Dynamics is 3.9 times more volatile than CBAAU 1125 15 JUN 26. It trades about 0.14 of its potential returns per unit of risk. CBAAU 1125 15 JUN 26 is currently generating about -0.17 per unit of risk. If you would invest  11,014  in Steel Dynamics on September 12, 2024 and sell it today you would earn a total of  2,442  from holding Steel Dynamics or generate 22.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	53.13%
Values	Daily Returns

Steel Dynamics  vs.  CBAAU 1125 15 JUN 26

Steel Dynamics

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Steel Dynamics are ranked lower than 10 (%) 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.

CBAAU 1125 15

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CBAAU 1125 15 JUN 26 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for CBAAU 1125 15 JUN 26 investors.

Pair Trading with Steel Dynamics and CBAAU

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

The idea behind Steel Dynamics and CBAAU 1125 15 JUN 26 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.