Correlation Between Steel Dynamics and Insas Bhd

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

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

Diversification Opportunities for Steel Dynamics and Insas Bhd

-0.59

Correlation Coefficient

Steel Dynamics  Insas Bhd

Excellent diversification

The 3 months correlation between Steel and Insas is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and Insas Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Insas Bhd 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 Insas Bhd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Insas Bhd has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and Insas Bhd go up and down completely randomly.

Pair Corralation between Steel Dynamics and Insas Bhd

Given the investment horizon of 90 days Steel Dynamics is expected to generate 2.33 times more return on investment than Insas Bhd. However, Steel Dynamics is 2.33 times more volatile than Insas Bhd. It trades about 0.11 of its potential returns per unit of risk. Insas Bhd is currently generating about -0.09 per unit of risk. If you would invest  13,358  in Steel Dynamics on September 4, 2024 and sell it today you would earn a total of  962.00  from holding Steel Dynamics or generate 7.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Steel Dynamics  vs.  Insas Bhd

Steel Dynamics

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Steel Dynamics are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile essential indicators, Steel Dynamics exhibited solid returns over the last few months and may actually be approaching a breakup point.

Insas Bhd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Insas Bhd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Steel Dynamics and Insas Bhd

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

The idea behind Steel Dynamics and Insas Bhd 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.