Correlation Between STEEL DYNAMICS and PT Steel

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

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

Diversification Opportunities for STEEL DYNAMICS and PT Steel

-0.07

Correlation Coefficient

STEEL DYNAMICS  PT Steel

Good diversification

The 3 months correlation between STEEL and S08 is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding STEEL DYNAMICS and PT Steel Pipe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Steel Pipe 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 PT Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Steel Pipe has no effect on the direction of STEEL DYNAMICS i.e., STEEL DYNAMICS and PT Steel go up and down completely randomly.

Pair Corralation between STEEL DYNAMICS and PT Steel

Assuming the 90 days trading horizon STEEL DYNAMICS is expected to generate 0.49 times more return on investment than PT Steel. However, STEEL DYNAMICS is 2.06 times less risky than PT Steel. It trades about 0.05 of its potential returns per unit of risk. PT Steel Pipe is currently generating about 0.02 per unit of risk. If you would invest  10,942  in STEEL DYNAMICS on December 20, 2024 and sell it today you would earn a total of  596.00  from holding STEEL DYNAMICS or generate 5.45% return on investment over 90 days.

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

STEEL DYNAMICS  vs.  PT Steel Pipe

STEEL DYNAMICS

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in STEEL DYNAMICS are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, STEEL DYNAMICS may actually be approaching a critical reversion point that can send shares even higher in April 2025.

PT Steel Pipe

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PT Steel Pipe are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, PT Steel 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 PT Steel

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

The idea behind STEEL DYNAMICS and PT Steel Pipe 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.