Correlation Between Steel Dynamics and BANK RAKYAT

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

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

Diversification Opportunities for Steel Dynamics and BANK RAKYAT

-0.26

Correlation Coefficient

Steel Dynamics  BANK RAKYAT

Very good diversification

The 3 months correlation between Steel and BANK is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and BANK RAKYAT IND in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BANK RAKYAT IND 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 BANK RAKYAT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BANK RAKYAT IND has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and BANK RAKYAT go up and down completely randomly.

Pair Corralation between Steel Dynamics and BANK RAKYAT

Given the investment horizon of 90 days Steel Dynamics is expected to generate 0.4 times more return on investment than BANK RAKYAT. However, Steel Dynamics is 2.5 times less risky than BANK RAKYAT. It trades about 0.08 of its potential returns per unit of risk. BANK RAKYAT IND is currently generating about 0.01 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  1,063  from holding Steel Dynamics or generate 9.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Steel Dynamics  vs.  BANK RAKYAT IND

Steel Dynamics

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Steel Dynamics are ranked lower than 6 (%) 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.

BANK RAKYAT IND

Risk-Adjusted Performance

Very Weak

Over the last 90 days BANK RAKYAT IND has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, BANK RAKYAT is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Steel Dynamics and BANK RAKYAT

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

The idea behind Steel Dynamics and BANK RAKYAT IND 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.