Correlation Between Steel Dynamics and Balanced Fund
Can any of the company-specific risk be diversified away by investing in both Steel Dynamics and Balanced Fund 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 Balanced Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Dynamics and Balanced Fund Institutional, you can compare the effects of market volatilities on Steel Dynamics and Balanced Fund 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 Balanced Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and Balanced Fund.
Diversification Opportunities for Steel Dynamics and Balanced Fund
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Steel and Balanced is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and Balanced Fund Institutional in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Balanced Fund Instit 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 Balanced Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Balanced Fund Instit has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and Balanced Fund go up and down completely randomly.
Pair Corralation between Steel Dynamics and Balanced Fund
Given the investment horizon of 90 days Steel Dynamics is expected to generate 5.06 times more return on investment than Balanced Fund. However, Steel Dynamics is 5.06 times more volatile than Balanced Fund Institutional. It trades about 0.14 of its potential returns per unit of risk. Balanced Fund Institutional is currently generating about 0.13 per unit of risk. If you would invest 11,014 in Steel Dynamics on September 12, 2024 and sell it today you would earn a total of 2,442 from holding Steel Dynamics or generate 22.18% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Steel Dynamics vs. Balanced Fund Institutional
Performance |
Timeline |
Steel Dynamics |
Balanced Fund Instit |
Steel Dynamics and Balanced Fund Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Steel Dynamics and Balanced Fund
The main advantage of trading using opposite Steel Dynamics and Balanced Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics position performs unexpectedly, Balanced Fund 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 Balanced Fund will offset losses from the drop in Balanced Fund'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 |
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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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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