Correlation Between Steel Dynamics and Deutsche Boerse

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

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

Diversification Opportunities for Steel Dynamics and Deutsche Boerse

0.39

Correlation Coefficient

Steel Dynamics  Deutsche Boerse

Weak diversification

The 3 months correlation between Steel and Deutsche is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and Deutsche Boerse AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutsche Boerse AG 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 Deutsche Boerse. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deutsche Boerse AG has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and Deutsche Boerse go up and down completely randomly.

Pair Corralation between Steel Dynamics and Deutsche Boerse

Given the investment horizon of 90 days Steel Dynamics is expected to generate 2.34 times less return on investment than Deutsche Boerse. In addition to that, Steel Dynamics is 1.85 times more volatile than Deutsche Boerse AG. It trades about 0.08 of its total potential returns per unit of risk. Deutsche Boerse AG is currently generating about 0.34 per unit of volatility. If you would invest  2,312  in Deutsche Boerse AG on December 29, 2024 and sell it today you would earn a total of  619.00  from holding Deutsche Boerse AG or generate 26.77% return on investment over 90 days.

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

Steel Dynamics  vs.  Deutsche Boerse AG

Steel Dynamics

Risk-Adjusted Performance

Modest

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.

Deutsche Boerse AG

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Deutsche Boerse AG are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Deutsche Boerse showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Steel Dynamics and Deutsche Boerse

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

The idea behind Steel Dynamics and Deutsche Boerse AG 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.