Correlation Between Steel Dynamics and FT AlphaDEX
Can any of the company-specific risk be diversified away by investing in both Steel Dynamics and FT AlphaDEX 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 FT AlphaDEX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Dynamics and FT AlphaDEX Industrials, you can compare the effects of market volatilities on Steel Dynamics and FT AlphaDEX 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 FT AlphaDEX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and FT AlphaDEX.
Diversification Opportunities for Steel Dynamics and FT AlphaDEX
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Steel and FHG is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and FT AlphaDEX Industrials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FT AlphaDEX Industrials 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 FT AlphaDEX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FT AlphaDEX Industrials has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and FT AlphaDEX go up and down completely randomly.
Pair Corralation between Steel Dynamics and FT AlphaDEX
Given the investment horizon of 90 days Steel Dynamics is expected to generate 2.14 times more return on investment than FT AlphaDEX. However, Steel Dynamics is 2.14 times more volatile than FT AlphaDEX Industrials. It trades about 0.24 of its potential returns per unit of risk. FT AlphaDEX Industrials is currently generating about -0.04 per unit of risk. If you would invest 11,193 in Steel Dynamics on December 2, 2024 and sell it today you would earn a total of 2,314 from holding Steel Dynamics or generate 20.67% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 95.24% |
Values | Daily Returns |
Steel Dynamics vs. FT AlphaDEX Industrials
Performance |
Timeline |
Steel Dynamics |
FT AlphaDEX Industrials |
Steel Dynamics and FT AlphaDEX Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Steel Dynamics and FT AlphaDEX
The main advantage of trading using opposite Steel Dynamics and FT AlphaDEX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics position performs unexpectedly, FT AlphaDEX 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 FT AlphaDEX will offset losses from the drop in FT AlphaDEX'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 |
FT AlphaDEX vs. First Trust AlphaDEX | FT AlphaDEX vs. First Trust AlphaDEX | FT AlphaDEX vs. First Trust Senior | FT AlphaDEX vs. First Trust Value |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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