Correlation Between Steel Dynamics and Panasonic Corp

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

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

Diversification Opportunities for Steel Dynamics and Panasonic Corp

0.15

Correlation Coefficient

Steel Dynamics  Panasonic Corp

Average diversification

The 3 months correlation between Steel and Panasonic is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and Panasonic Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Panasonic Corp 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 Panasonic Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Panasonic Corp has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and Panasonic Corp go up and down completely randomly.

Pair Corralation between Steel Dynamics and Panasonic Corp

Given the investment horizon of 90 days Steel Dynamics is expected to under-perform the Panasonic Corp. In addition to that, Steel Dynamics is 1.0 times more volatile than Panasonic Corp. It trades about -0.04 of its total potential returns per unit of risk. Panasonic Corp is currently generating about 0.21 per unit of volatility. If you would invest  913.00  in Panasonic Corp on December 2, 2024 and sell it today you would earn a total of  257.00  from holding Panasonic Corp or generate 28.15% return on investment over 90 days.

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

Steel Dynamics  vs.  Panasonic Corp

Steel Dynamics

Risk-Adjusted Performance

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 rather sound essential indicators, Steel Dynamics is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Panasonic Corp

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Panasonic Corp are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Panasonic Corp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Steel Dynamics and Panasonic Corp

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

The idea behind Steel Dynamics and Panasonic Corp 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.