Correlation Between Steel Dynamics and AIM ETF

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Can any of the company-specific risk be diversified away by investing in both Steel Dynamics and AIM ETF 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 AIM ETF into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Dynamics and AIM ETF Products, you can compare the effects of market volatilities on Steel Dynamics and AIM ETF 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 AIM ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and AIM ETF.

Diversification Opportunities for Steel Dynamics and AIM ETF

0.94
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Steel and AIM is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and AIM ETF Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AIM ETF Products 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 AIM ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AIM ETF Products has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and AIM ETF go up and down completely randomly.

Pair Corralation between Steel Dynamics and AIM ETF

Given the investment horizon of 90 days Steel Dynamics is expected to generate 7.96 times more return on investment than AIM ETF. However, Steel Dynamics is 7.96 times more volatile than AIM ETF Products. It trades about 0.17 of its potential returns per unit of risk. AIM ETF Products is currently generating about 0.23 per unit of risk. If you would invest  11,091  in Steel Dynamics on September 5, 2024 and sell it today you would earn a total of  3,229  from holding Steel Dynamics or generate 29.11% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Steel Dynamics  vs.  AIM ETF Products

 Performance 
       Timeline  
Steel Dynamics 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Steel Dynamics are ranked lower than 13 (%) 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.
AIM ETF Products 

Risk-Adjusted Performance

18 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in AIM ETF Products are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable essential indicators, AIM ETF is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Steel Dynamics and AIM ETF Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Steel Dynamics and AIM ETF

The main advantage of trading using opposite Steel Dynamics and AIM ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics position performs unexpectedly, AIM ETF 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 AIM ETF will offset losses from the drop in AIM ETF's long position.
The idea behind Steel Dynamics and AIM ETF Products 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.

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