Correlation Between Steel Dynamics and Pro-blend(r) Moderate
Can any of the company-specific risk be diversified away by investing in both Steel Dynamics and Pro-blend(r) Moderate 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 Pro-blend(r) Moderate into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Dynamics and Pro Blend Moderate Term, you can compare the effects of market volatilities on Steel Dynamics and Pro-blend(r) Moderate 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 Pro-blend(r) Moderate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and Pro-blend(r) Moderate.
Diversification Opportunities for Steel Dynamics and Pro-blend(r) Moderate
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Steel and Pro-blend(r) is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and Pro Blend Moderate Term in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pro-blend(r) Moderate 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 Pro-blend(r) Moderate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pro-blend(r) Moderate has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and Pro-blend(r) Moderate go up and down completely randomly.
Pair Corralation between Steel Dynamics and Pro-blend(r) Moderate
Given the investment horizon of 90 days Steel Dynamics is expected to under-perform the Pro-blend(r) Moderate. In addition to that, Steel Dynamics is 3.77 times more volatile than Pro Blend Moderate Term. It trades about -0.04 of its total potential returns per unit of risk. Pro Blend Moderate Term is currently generating about -0.05 per unit of volatility. If you would invest 1,475 in Pro Blend Moderate Term on December 2, 2024 and sell it today you would lose (26.00) from holding Pro Blend Moderate Term or give up 1.76% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Steel Dynamics vs. Pro Blend Moderate Term
Performance |
Timeline |
Steel Dynamics |
Pro-blend(r) Moderate |
Steel Dynamics and Pro-blend(r) Moderate Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Steel Dynamics and Pro-blend(r) Moderate
The main advantage of trading using opposite Steel Dynamics and Pro-blend(r) Moderate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics position performs unexpectedly, Pro-blend(r) Moderate 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 Pro-blend(r) Moderate will offset losses from the drop in Pro-blend(r) Moderate'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 |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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