Correlation Between STEEL DYNAMICS and Wüstenrot Württembergische

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

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

Diversification Opportunities for STEEL DYNAMICS and Wüstenrot Württembergische

0.4

Correlation Coefficient

STEEL DYNAMICS  Wüstenrot Württembergische

Very weak diversification

The 3 months correlation between STEEL and Wüstenrot is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding STEEL DYNAMICS and Wstenrot Wrttembergische AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wüstenrot Württembergische 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 Wüstenrot Württembergische. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wüstenrot Württembergische has no effect on the direction of STEEL DYNAMICS i.e., STEEL DYNAMICS and Wüstenrot Württembergische go up and down completely randomly.

Pair Corralation between STEEL DYNAMICS and Wüstenrot Württembergische

Assuming the 90 days trading horizon STEEL DYNAMICS is expected to generate 2.2 times more return on investment than Wüstenrot Württembergische. However, STEEL DYNAMICS is 2.2 times more volatile than Wstenrot Wrttembergische AG. It trades about 0.01 of its potential returns per unit of risk. Wstenrot Wrttembergische AG is currently generating about 0.0 per unit of risk. If you would invest  11,888  in STEEL DYNAMICS on October 24, 2024 and sell it today you would earn a total of  66.00  from holding STEEL DYNAMICS or generate 0.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

STEEL DYNAMICS  vs.  Wstenrot Wrttembergische AG

STEEL DYNAMICS

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in STEEL DYNAMICS are ranked lower than 1 (%) 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.

Wüstenrot Württembergische

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with STEEL DYNAMICS and Wüstenrot Württembergische

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

The idea behind STEEL DYNAMICS and Wstenrot Wrttembergische AG 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.