Correlation Between Steel Dynamics and Centerra Gold

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

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

Diversification Opportunities for Steel Dynamics and Centerra Gold

-0.2

Correlation Coefficient

Steel Dynamics  Centerra Gold

Good diversification

The 3 months correlation between Steel and Centerra is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and Centerra Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centerra Gold 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 Centerra Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Centerra Gold has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and Centerra Gold go up and down completely randomly.

Pair Corralation between Steel Dynamics and Centerra Gold

Given the investment horizon of 90 days Steel Dynamics is expected to under-perform the Centerra Gold. But the stock apears to be less risky and, when comparing its historical volatility, Steel Dynamics is 1.32 times less risky than Centerra Gold. The stock trades about -0.63 of its potential returns per unit of risk. The Centerra Gold is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  591.00  in Centerra Gold on September 27, 2024 and sell it today you would lose (29.00) from holding Centerra Gold or give up 4.91% of portfolio value over 90 days.

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

Steel Dynamics  vs.  Centerra Gold

Steel Dynamics

Risk-Adjusted Performance

0 of 100

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.

Centerra Gold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Centerra Gold has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Steel Dynamics and Centerra Gold

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

The idea behind Steel Dynamics and Centerra Gold 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.