Correlation Between STEEL DYNAMICS and LEGACY IRON

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

By analyzing existing cross correlation between STEEL DYNAMICS and LEGACY IRON ORE, you can compare the effects of market volatilities on STEEL DYNAMICS and LEGACY IRON 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 LEGACY IRON. Check out your portfolio center. Please also check ongoing floating volatility patterns of STEEL DYNAMICS and LEGACY IRON.

Diversification Opportunities for STEEL DYNAMICS and LEGACY IRON

-0.41

Correlation Coefficient

STEEL DYNAMICS  LEGACY IRON

Very good diversification

The 3 months correlation between STEEL and LEGACY is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding STEEL DYNAMICS and LEGACY IRON ORE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LEGACY IRON ORE 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 LEGACY IRON. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LEGACY IRON ORE has no effect on the direction of STEEL DYNAMICS i.e., STEEL DYNAMICS and LEGACY IRON go up and down completely randomly.

Pair Corralation between STEEL DYNAMICS and LEGACY IRON

If you would invest  1.05  in LEGACY IRON ORE on October 8, 2024 and sell it today you would earn a total of  0.00  from holding LEGACY IRON ORE or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	93.75%
Values	Daily Returns

STEEL DYNAMICS  vs.  LEGACY IRON ORE

STEEL DYNAMICS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days STEEL DYNAMICS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, STEEL DYNAMICS is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

LEGACY IRON ORE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LEGACY IRON ORE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with STEEL DYNAMICS and LEGACY IRON

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

The idea behind STEEL DYNAMICS and LEGACY IRON ORE 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.