Correlation Between Steel Dynamics and Humanica Public

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

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

Diversification Opportunities for Steel Dynamics and Humanica Public

-0.53

Correlation Coefficient

Steel Dynamics  Humanica Public

Excellent diversification

The 3 months correlation between Steel and Humanica is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and Humanica Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Humanica Public 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 Humanica Public. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Humanica Public has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and Humanica Public go up and down completely randomly.

Pair Corralation between Steel Dynamics and Humanica Public

Given the investment horizon of 90 days Steel Dynamics is expected to generate 0.8 times more return on investment than Humanica Public. However, Steel Dynamics is 1.25 times less risky than Humanica Public. It trades about 0.08 of its potential returns per unit of risk. Humanica Public is currently generating about -0.01 per unit of risk. If you would invest  11,334  in Steel Dynamics on December 30, 2024 and sell it today you would earn a total of  1,063  from holding Steel Dynamics or generate 9.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Steel Dynamics  vs.  Humanica Public

Steel Dynamics

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Steel Dynamics are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile essential indicators, Steel Dynamics may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Humanica Public

Risk-Adjusted Performance

Very Weak

Over the last 90 days Humanica Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Humanica Public is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Steel Dynamics and Humanica Public

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

The idea behind Steel Dynamics and Humanica Public 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.

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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.