Correlation Between Steel Dynamics and YCC Parts

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

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

Diversification Opportunities for Steel Dynamics and YCC Parts

0.51

Correlation Coefficient

Steel Dynamics  YCC Parts

Very weak diversification

The 3 months correlation between Steel and YCC is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and YCC Parts MFG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on YCC Parts MFG 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 YCC Parts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of YCC Parts MFG has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and YCC Parts go up and down completely randomly.

Pair Corralation between Steel Dynamics and YCC Parts

Given the investment horizon of 90 days Steel Dynamics is expected to generate 2.35 times more return on investment than YCC Parts. However, Steel Dynamics is 2.35 times more volatile than YCC Parts MFG. It trades about 0.09 of its potential returns per unit of risk. YCC Parts MFG is currently generating about 0.11 per unit of risk. If you would invest  11,530  in Steel Dynamics on December 27, 2024 and sell it today you would earn a total of  1,269  from holding Steel Dynamics or generate 11.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	91.8%
Values	Daily Returns

Steel Dynamics  vs.  YCC Parts MFG

Steel Dynamics

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Steel Dynamics are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile essential indicators, Steel Dynamics may actually be approaching a critical reversion point that can send shares even higher in April 2025.

YCC Parts MFG

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in YCC Parts MFG are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, YCC Parts is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Steel Dynamics and YCC Parts

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

The idea behind Steel Dynamics and YCC Parts MFG 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.