Correlation Between Steel Dynamics and Fair Isaac

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

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

Diversification Opportunities for Steel Dynamics and Fair Isaac

0.89

Correlation Coefficient

Steel Dynamics  Fair Isaac

Very poor diversification

The 3 months correlation between Steel and Fair is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and Fair Isaac Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fair Isaac Corp 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 Fair Isaac. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fair Isaac Corp has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and Fair Isaac go up and down completely randomly.

Pair Corralation between Steel Dynamics and Fair Isaac

Given the investment horizon of 90 days Steel Dynamics is expected to generate 1.29 times less return on investment than Fair Isaac. In addition to that, Steel Dynamics is 1.26 times more volatile than Fair Isaac Corp. It trades about 0.18 of its total potential returns per unit of risk. Fair Isaac Corp is currently generating about 0.28 per unit of volatility. If you would invest  157,100  in Fair Isaac Corp on September 5, 2024 and sell it today you would earn a total of  65,000  from holding Fair Isaac Corp or generate 41.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

Steel Dynamics  vs.  Fair Isaac Corp

Steel Dynamics

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Steel Dynamics are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile essential indicators, Steel Dynamics exhibited solid returns over the last few months and may actually be approaching a breakup point.

Fair Isaac Corp

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fair Isaac Corp are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Fair Isaac unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Steel Dynamics and Fair Isaac

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

The idea behind Steel Dynamics and Fair Isaac Corp 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.