Correlation Between STEEL DYNAMICS and Amazon

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

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

Diversification Opportunities for STEEL DYNAMICS and Amazon

0.32

Correlation Coefficient

STEEL DYNAMICS  Amazon

Weak diversification

The 3 months correlation between STEEL and Amazon is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding STEEL DYNAMICS and Amazon Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amazon Inc 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 Amazon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amazon Inc has no effect on the direction of STEEL DYNAMICS i.e., STEEL DYNAMICS and Amazon go up and down completely randomly.

Pair Corralation between STEEL DYNAMICS and Amazon

Assuming the 90 days trading horizon STEEL DYNAMICS is expected to generate 1.35 times more return on investment than Amazon. However, STEEL DYNAMICS is 1.35 times more volatile than Amazon Inc. It trades about 0.05 of its potential returns per unit of risk. Amazon Inc is currently generating about -0.19 per unit of risk. If you would invest  11,055  in STEEL DYNAMICS on December 22, 2024 and sell it today you would earn a total of  521.00  from holding STEEL DYNAMICS or generate 4.71% 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.  Amazon Inc

STEEL DYNAMICS

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in STEEL DYNAMICS are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, STEEL DYNAMICS is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Amazon Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Amazon Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with STEEL DYNAMICS and Amazon

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

The idea behind STEEL DYNAMICS and Amazon Inc 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.