Correlation Between Steel Dynamics and Dagang Nexchange

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Steel Dynamics and Dagang Nexchange 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 Dagang Nexchange into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Dynamics and Dagang Nexchange Bhd, you can compare the effects of market volatilities on Steel Dynamics and Dagang Nexchange 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 Dagang Nexchange. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and Dagang Nexchange.

Diversification Opportunities for Steel Dynamics and Dagang Nexchange

-0.7
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Steel and Dagang is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and Dagang Nexchange Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dagang Nexchange 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 Dagang Nexchange. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dagang Nexchange Bhd has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and Dagang Nexchange go up and down completely randomly.

Pair Corralation between Steel Dynamics and Dagang Nexchange

Given the investment horizon of 90 days Steel Dynamics is expected to generate 0.66 times more return on investment than Dagang Nexchange. However, Steel Dynamics is 1.51 times less risky than Dagang Nexchange. It trades about -0.04 of its potential returns per unit of risk. Dagang Nexchange Bhd is currently generating about -0.11 per unit of risk. If you would invest  14,422  in Steel Dynamics on December 2, 2024 and sell it today you would lose (915.00) from holding Steel Dynamics or give up 6.34% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Steel Dynamics  vs.  Dagang Nexchange Bhd

 Performance 
       Timeline  
Steel Dynamics 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
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.
Dagang Nexchange Bhd 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Dagang Nexchange Bhd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Steel Dynamics and Dagang Nexchange Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Steel Dynamics and Dagang Nexchange

The main advantage of trading using opposite Steel Dynamics and Dagang Nexchange positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics position performs unexpectedly, Dagang Nexchange 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 Dagang Nexchange will offset losses from the drop in Dagang Nexchange's long position.
The idea behind Steel Dynamics and Dagang Nexchange 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.
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.

Other Complementary Tools

Stocks Directory
Find actively traded stocks across global markets
Funds Screener
Find actively-traded funds from around the world traded on over 30 global exchanges
Commodity Channel
Use Commodity Channel Index to analyze current equity momentum
Portfolio Volatility
Check portfolio volatility and analyze historical return density to properly model market risk
Companies Directory
Evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals