Correlation Between Steel Dynamics and First National
Can any of the company-specific risk be diversified away by investing in both Steel Dynamics and First National 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 First National into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Dynamics and First National Financial, you can compare the effects of market volatilities on Steel Dynamics and First National 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 First National. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and First National.
Diversification Opportunities for Steel Dynamics and First National
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Steel and First is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and First National Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First National Financial 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 First National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First National Financial has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and First National go up and down completely randomly.
Pair Corralation between Steel Dynamics and First National
Given the investment horizon of 90 days Steel Dynamics is expected to generate 2.08 times more return on investment than First National. However, Steel Dynamics is 2.08 times more volatile than First National Financial. It trades about 0.14 of its potential returns per unit of risk. First National Financial is currently generating about 0.05 per unit of risk. If you would invest 12,820 in Steel Dynamics on December 2, 2024 and sell it today you would earn a total of 687.00 from holding Steel Dynamics or generate 5.36% 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. First National Financial
Performance |
Timeline |
Steel Dynamics |
First National Financial |
Steel Dynamics and First National Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Steel Dynamics and First National
The main advantage of trading using opposite Steel Dynamics and First National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics position performs unexpectedly, First National 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 First National will offset losses from the drop in First National'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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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