Correlation Between STEEL DYNAMICS and Yuexiu Transport

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

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

Diversification Opportunities for STEEL DYNAMICS and Yuexiu Transport

0.04

Correlation Coefficient

STEEL DYNAMICS  Yuexiu Transport

Significant diversification

The 3 months correlation between STEEL and Yuexiu is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding STEEL DYNAMICS and Yuexiu Transport Infrastructur in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yuexiu Transport Inf 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 Yuexiu Transport. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yuexiu Transport Inf has no effect on the direction of STEEL DYNAMICS i.e., STEEL DYNAMICS and Yuexiu Transport go up and down completely randomly.

Pair Corralation between STEEL DYNAMICS and Yuexiu Transport

Assuming the 90 days trading horizon STEEL DYNAMICS is expected to generate 0.99 times more return on investment than Yuexiu Transport. However, STEEL DYNAMICS is 1.01 times less risky than Yuexiu Transport. It trades about 0.04 of its potential returns per unit of risk. Yuexiu Transport Infrastructure is currently generating about -0.01 per unit of risk. If you would invest  11,055  in STEEL DYNAMICS on December 21, 2024 and sell it today you would earn a total of  487.00  from holding STEEL DYNAMICS or generate 4.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

STEEL DYNAMICS  vs.  Yuexiu Transport Infrastructur

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.

Yuexiu Transport Inf

Risk-Adjusted Performance

Very Weak

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

Pair Trading with STEEL DYNAMICS and Yuexiu Transport

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

The idea behind STEEL DYNAMICS and Yuexiu Transport Infrastructure 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.