Correlation Between Steel Dynamics and Perkins Small
Can any of the company-specific risk be diversified away by investing in both Steel Dynamics and Perkins Small 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 Perkins Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Dynamics and Perkins Small Cap, you can compare the effects of market volatilities on Steel Dynamics and Perkins Small 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 Perkins Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and Perkins Small.
Diversification Opportunities for Steel Dynamics and Perkins Small
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Steel and Perkins is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and Perkins Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Perkins Small Cap 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 Perkins Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Perkins Small Cap has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and Perkins Small go up and down completely randomly.
Pair Corralation between Steel Dynamics and Perkins Small
Given the investment horizon of 90 days Steel Dynamics is expected to generate 1.98 times more return on investment than Perkins Small. However, Steel Dynamics is 1.98 times more volatile than Perkins Small Cap. It trades about 0.17 of its potential returns per unit of risk. Perkins Small Cap is currently generating about 0.14 per unit of risk. If you would invest 11,059 in Steel Dynamics on September 6, 2024 and sell it today you would earn a total of 3,079 from holding Steel Dynamics or generate 27.84% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Steel Dynamics vs. Perkins Small Cap
Performance |
Timeline |
Steel Dynamics |
Perkins Small Cap |
Steel Dynamics and Perkins Small Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Steel Dynamics and Perkins Small
The main advantage of trading using opposite Steel Dynamics and Perkins Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics position performs unexpectedly, Perkins Small 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 Perkins Small will offset losses from the drop in Perkins Small's long position.Steel Dynamics vs. Cleveland Cliffs | Steel Dynamics vs. United States Steel | Steel Dynamics vs. ArcelorMittal SA ADR | Steel Dynamics vs. Reliance Steel Aluminum |
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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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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