Correlation Between Steel Dynamics and Kayne Anderson

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

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

Diversification Opportunities for Steel Dynamics and Kayne Anderson

0.39

Correlation Coefficient

Steel Dynamics  Kayne Anderson

Weak diversification

The 3 months correlation between Steel and Kayne is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and Kayne Anderson MLP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kayne Anderson MLP 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 Kayne Anderson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kayne Anderson MLP has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and Kayne Anderson go up and down completely randomly.

Pair Corralation between Steel Dynamics and Kayne Anderson

Given the investment horizon of 90 days Steel Dynamics is expected to under-perform the Kayne Anderson. In addition to that, Steel Dynamics is 1.51 times more volatile than Kayne Anderson MLP. It trades about -0.07 of its total potential returns per unit of risk. Kayne Anderson MLP is currently generating about 0.1 per unit of volatility. If you would invest  1,257  in Kayne Anderson MLP on December 27, 2024 and sell it today you would earn a total of  36.00  from holding Kayne Anderson MLP or generate 2.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Steel Dynamics  vs.  Kayne Anderson MLP

Steel Dynamics

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Steel Dynamics are ranked lower than 7 (%) 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.

Kayne Anderson MLP

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kayne Anderson MLP are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, Kayne Anderson may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Steel Dynamics and Kayne Anderson

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

The idea behind Steel Dynamics and Kayne Anderson MLP 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.