Correlation Between Steel Dynamics and Anchor Tactical

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

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

Diversification Opportunities for Steel Dynamics and Anchor Tactical

0.17

Correlation Coefficient

Steel Dynamics  Anchor Tactical

Average diversification

The 3 months correlation between Steel and Anchor is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and Anchor Tactical Credit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anchor Tactical Credit 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 Anchor Tactical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anchor Tactical Credit has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and Anchor Tactical go up and down completely randomly.

Pair Corralation between Steel Dynamics and Anchor Tactical

Given the investment horizon of 90 days Steel Dynamics is expected to under-perform the Anchor Tactical. But the stock apears to be less risky and, when comparing its historical volatility, Steel Dynamics is 7.14 times less risky than Anchor Tactical. The stock trades about -0.04 of its potential returns per unit of risk. The Anchor Tactical Credit is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,662  in Anchor Tactical Credit on December 2, 2024 and sell it today you would earn a total of  5.00  from holding Anchor Tactical Credit or generate 0.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Steel Dynamics  vs.  Anchor Tactical Credit

Steel Dynamics

Risk-Adjusted Performance

Very Weak

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.

Anchor Tactical Credit

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Anchor Tactical Credit are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Anchor Tactical showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Steel Dynamics and Anchor Tactical

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

The idea behind Steel Dynamics and Anchor Tactical Credit 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.