Correlation Between Steel Dynamics and Hop On

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

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

Diversification Opportunities for Steel Dynamics and Hop On

0.42

Correlation Coefficient

Steel Dynamics  Hop On

Very weak diversification

The 3 months correlation between Steel and Hop is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and Hop On Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hop On Inc 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 Hop On. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hop On Inc has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and Hop On go up and down completely randomly.

Pair Corralation between Steel Dynamics and Hop On

Given the investment horizon of 90 days Steel Dynamics is expected to under-perform the Hop On. But the stock apears to be less risky and, when comparing its historical volatility, Steel Dynamics is 7.09 times less risky than Hop On. The stock trades about -0.04 of its potential returns per unit of risk. The Hop On Inc is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  0.08  in Hop On Inc on December 2, 2024 and sell it today you would lose (0.03) from holding Hop On Inc or give up 37.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Steel Dynamics  vs.  Hop On Inc

Steel Dynamics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Steel Dynamics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, Steel Dynamics is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Hop On Inc

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hop On Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Hop On displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Steel Dynamics and Hop On

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

The idea behind Steel Dynamics and Hop On Inc 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.