Correlation Between Steel Dynamics and Hycroft Mining

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

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

Diversification Opportunities for Steel Dynamics and Hycroft Mining

0.26

Correlation Coefficient

Steel Dynamics  Hycroft Mining

Modest diversification

The 3 months correlation between Steel and Hycroft is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and Hycroft Mining Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hycroft Mining Holding 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 Hycroft Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hycroft Mining Holding has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and Hycroft Mining go up and down completely randomly.

Pair Corralation between Steel Dynamics and Hycroft Mining

Given the investment horizon of 90 days Steel Dynamics is expected to generate 18.53 times less return on investment than Hycroft Mining. But when comparing it to its historical volatility, Steel Dynamics is 7.14 times less risky than Hycroft Mining. It trades about 0.02 of its potential returns per unit of risk. Hycroft Mining Holding is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  7.25  in Hycroft Mining Holding on October 4, 2024 and sell it today you would lose (6.71) from holding Hycroft Mining Holding or give up 92.55% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.79%
Values	Daily Returns

Steel Dynamics  vs.  Hycroft Mining Holding

Steel Dynamics

Risk-Adjusted Performance

0 of 100

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 latest fragile performance, the Stock's essential indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Hycroft Mining Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hycroft Mining Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's fundamental indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Steel Dynamics and Hycroft Mining

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

The idea behind Steel Dynamics and Hycroft Mining Holding 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.