Correlation Between Steel Dynamics and DXC Technology

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

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

Diversification Opportunities for Steel Dynamics and DXC Technology

0.0

Correlation Coefficient

Steel Dynamics  DXC Technology

Pay attention - limited upside

The 3 months correlation between Steel and DXC is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and DXC Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DXC Technology 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 DXC Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DXC Technology has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and DXC Technology go up and down completely randomly.

Pair Corralation between Steel Dynamics and DXC Technology

If you would invest  302,111  in Steel Dynamics on October 4, 2024 and sell it today you would earn a total of  956.00  from holding Steel Dynamics or generate 0.32% return on investment over 90 days.

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

Steel Dynamics  vs.  DXC Technology

Steel Dynamics

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Steel Dynamics are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Steel Dynamics showed solid returns over the last few months and may actually be approaching a breakup point.

DXC Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DXC Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, DXC Technology is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Steel Dynamics and DXC Technology

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

The idea behind Steel Dynamics and DXC Technology 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.

Check out your portfolio center.

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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.