Correlation Between Steel Dynamics and At Mid

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

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

Diversification Opportunities for Steel Dynamics and At Mid

0.12

Correlation Coefficient

Steel Dynamics  At Mid

Average diversification

The 3 months correlation between Steel and AWMIX is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and At Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on At Mid Cap 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 At Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of At Mid Cap has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and At Mid go up and down completely randomly.

Pair Corralation between Steel Dynamics and At Mid

Given the investment horizon of 90 days Steel Dynamics is expected to generate 1.72 times more return on investment than At Mid. However, Steel Dynamics is 1.72 times more volatile than At Mid Cap. It trades about 0.11 of its potential returns per unit of risk. At Mid Cap is currently generating about -0.05 per unit of risk. If you would invest  11,334  in Steel Dynamics on December 28, 2024 and sell it today you would earn a total of  1,500  from holding Steel Dynamics or generate 13.23% 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.  At Mid Cap

Steel Dynamics

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Steel Dynamics are ranked lower than 8 (%) 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.

At Mid Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days At Mid Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, At Mid is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Steel Dynamics and At Mid

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

The idea behind Steel Dynamics and At Mid Cap 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.