Correlation Between Steel Dynamics and 437076CQ3

Can any of the company-specific risk be diversified away by investing in both Steel Dynamics and 437076CQ3 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 437076CQ3 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Steel Dynamics and HD 3625 15 APR 52, you can compare the effects of market volatilities on Steel Dynamics and 437076CQ3 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 437076CQ3. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and 437076CQ3.

Diversification Opportunities for Steel Dynamics and 437076CQ3

-0.73

Correlation Coefficient

Steel Dynamics  437076CQ3

Pay attention - limited upside

The 3 months correlation between Steel and 437076CQ3 is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and HD 3625 15 APR 52 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HD 3625 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 437076CQ3. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HD 3625 15 has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and 437076CQ3 go up and down completely randomly.

Pair Corralation between Steel Dynamics and 437076CQ3

Given the investment horizon of 90 days Steel Dynamics is expected to generate 3.23 times more return on investment than 437076CQ3. However, Steel Dynamics is 3.23 times more volatile than HD 3625 15 APR 52. It trades about 0.12 of its potential returns per unit of risk. HD 3625 15 APR 52 is currently generating about -0.1 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 Against
Strength	Weak
Accuracy	90.48%
Values	Daily Returns

Steel Dynamics  vs.  HD 3625 15 APR 52

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.

HD 3625 15

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HD 3625 15 APR 52 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 437076CQ3 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 437076CQ3

The main advantage of trading using opposite Steel Dynamics and 437076CQ3 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics position performs unexpectedly, 437076CQ3 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 437076CQ3 will offset losses from the drop in 437076CQ3's long position.

The idea behind Steel Dynamics and HD 3625 15 APR 52 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.