Correlation Between ANTA Sports and Steel Dynamics

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

By analyzing existing cross correlation between ANTA Sports Products and Steel Dynamics, you can compare the effects of market volatilities on ANTA Sports and Steel Dynamics 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 ANTA Sports with a short position of Steel Dynamics. Check out your portfolio center. Please also check ongoing floating volatility patterns of ANTA Sports and Steel Dynamics.

Diversification Opportunities for ANTA Sports and Steel Dynamics

0.36

Correlation Coefficient

ANTA Sports  Steel Dynamics

Weak diversification

The 3 months correlation between ANTA and Steel is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding ANTA Sports Products and Steel Dynamics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steel Dynamics and ANTA Sports 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 ANTA Sports Products are associated (or correlated) with Steel Dynamics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Steel Dynamics has no effect on the direction of ANTA Sports i.e., ANTA Sports and Steel Dynamics go up and down completely randomly.

Pair Corralation between ANTA Sports and Steel Dynamics

Assuming the 90 days trading horizon ANTA Sports is expected to generate 2.64 times less return on investment than Steel Dynamics. But when comparing it to its historical volatility, ANTA Sports Products is 1.13 times less risky than Steel Dynamics. It trades about 0.08 of its potential returns per unit of risk. Steel Dynamics is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  11,500  in Steel Dynamics on November 28, 2024 and sell it today you would earn a total of  1,116  from holding Steel Dynamics or generate 9.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.65%
Values	Daily Returns

ANTA Sports Products  vs.  Steel Dynamics

ANTA Sports Products

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ANTA Sports Products are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, ANTA Sports exhibited solid returns over the last few months and may actually be approaching a breakup point.

Steel Dynamics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Steel Dynamics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Steel Dynamics is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with ANTA Sports and Steel Dynamics

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

The idea behind ANTA Sports Products and Steel Dynamics 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.