Correlation Between Steel Dynamics and ASOS Plc
Can any of the company-specific risk be diversified away by investing in both Steel Dynamics and ASOS Plc 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 ASOS Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Dynamics and ASOS plc PK, you can compare the effects of market volatilities on Steel Dynamics and ASOS Plc 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 ASOS Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and ASOS Plc.
Diversification Opportunities for Steel Dynamics and ASOS Plc
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Steel and ASOS is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and ASOS plc PK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ASOS plc PK 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 ASOS Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ASOS plc PK has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and ASOS Plc go up and down completely randomly.
Pair Corralation between Steel Dynamics and ASOS Plc
Given the investment horizon of 90 days Steel Dynamics is expected to generate 0.47 times more return on investment than ASOS Plc. However, Steel Dynamics is 2.14 times less risky than ASOS Plc. It trades about 0.09 of its potential returns per unit of risk. ASOS plc PK 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 Against |
Strength | Insignificant |
Accuracy | 98.36% |
Values | Daily Returns |
Steel Dynamics vs. ASOS plc PK
Performance |
Timeline |
Steel Dynamics |
ASOS plc PK |
Steel Dynamics and ASOS Plc Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Steel Dynamics and ASOS Plc
The main advantage of trading using opposite Steel Dynamics and ASOS Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics position performs unexpectedly, ASOS Plc 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 ASOS Plc will offset losses from the drop in ASOS Plc's long position.Steel Dynamics vs. Cleveland Cliffs | Steel Dynamics vs. United States Steel | Steel Dynamics vs. ArcelorMittal SA ADR | Steel Dynamics vs. Reliance Steel Aluminum |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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