Correlation Between Steel Dynamics and Australian High

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

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

Diversification Opportunities for Steel Dynamics and Australian High

0.61

Correlation Coefficient

Steel Dynamics  Australian High

Poor diversification

The 3 months correlation between Steel and Australian is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and Australian High Interest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian High Interest 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 Australian High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australian High Interest has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and Australian High go up and down completely randomly.

Pair Corralation between Steel Dynamics and Australian High

Given the investment horizon of 90 days Steel Dynamics is expected to generate 98.46 times more return on investment than Australian High. However, Steel Dynamics is 98.46 times more volatile than Australian High Interest. It trades about 0.09 of its potential returns per unit of risk. Australian High Interest is currently generating about 0.75 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	Significant
Accuracy	96.83%
Values	Daily Returns

Steel Dynamics  vs.  Australian High Interest

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.

Australian High Interest

Risk-Adjusted Performance

Market Crasher

Compared to the overall equity markets, risk-adjusted returns on investments in Australian High Interest are ranked lower than 59 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Australian High is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Steel Dynamics and Australian High

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

The idea behind Steel Dynamics and Australian High Interest 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.