Correlation Between Steel Dynamics and Mobase Electronics

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

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

Diversification Opportunities for Steel Dynamics and Mobase Electronics

0.63

Correlation Coefficient

Steel Dynamics  Mobase Electronics

Poor diversification

The 3 months correlation between Steel and Mobase is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and Mobase Electronics CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mobase Electronics CoLtd 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 Mobase Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mobase Electronics CoLtd has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and Mobase Electronics go up and down completely randomly.

Pair Corralation between Steel Dynamics and Mobase Electronics

Given the investment horizon of 90 days Steel Dynamics is expected to under-perform the Mobase Electronics. But the stock apears to be less risky and, when comparing its historical volatility, Steel Dynamics is 1.05 times less risky than Mobase Electronics. The stock trades about -0.04 of its potential returns per unit of risk. The Mobase Electronics CoLtd is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  153,200  in Mobase Electronics CoLtd on December 2, 2024 and sell it today you would earn a total of  2,100  from holding Mobase Electronics CoLtd or generate 1.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.72%
Values	Daily Returns

Steel Dynamics  vs.  Mobase Electronics CoLtd

Steel Dynamics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Steel Dynamics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, Steel Dynamics is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Mobase Electronics CoLtd

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Mobase Electronics CoLtd are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Mobase Electronics 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 Mobase Electronics

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

The idea behind Steel Dynamics and Mobase Electronics CoLtd 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.