Correlation Between Steel Dynamics and GoldMining

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

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

Diversification Opportunities for Steel Dynamics and GoldMining

-0.77

Correlation Coefficient

Steel Dynamics  GoldMining

Pay attention - limited upside

The 3 months correlation between Steel and GoldMining is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and GoldMining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GoldMining 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 GoldMining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GoldMining has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and GoldMining go up and down completely randomly.

Pair Corralation between Steel Dynamics and GoldMining

Given the investment horizon of 90 days Steel Dynamics is expected to generate 0.97 times more return on investment than GoldMining. However, Steel Dynamics is 1.03 times less risky than GoldMining. It trades about 0.12 of its potential returns per unit of risk. GoldMining is currently generating about -0.08 per unit of risk. If you would invest  11,243  in Steel Dynamics on September 13, 2024 and sell it today you would earn a total of  2,112  from holding Steel Dynamics or generate 18.79% return on investment over 90 days.

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

Steel Dynamics  vs.  GoldMining

Steel Dynamics

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Steel Dynamics are ranked lower than 9 (%) 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.

GoldMining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GoldMining has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Steel Dynamics and GoldMining

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

The idea behind Steel Dynamics and GoldMining 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.