Correlation Between Steel Dynamics and NAT ABSOLUTE

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

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

Diversification Opportunities for Steel Dynamics and NAT ABSOLUTE

-0.46

Correlation Coefficient

Steel Dynamics  NAT ABSOLUTE

Very good diversification

The 3 months correlation between Steel and NAT is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and NAT ABSOLUTE TECHNOLOGIES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NAT ABSOLUTE TECHNOLOGIES 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 NAT ABSOLUTE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NAT ABSOLUTE TECHNOLOGIES has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and NAT ABSOLUTE go up and down completely randomly.

Pair Corralation between Steel Dynamics and NAT ABSOLUTE

Given the investment horizon of 90 days Steel Dynamics is expected to generate 1.53 times more return on investment than NAT ABSOLUTE. However, Steel Dynamics is 1.53 times more volatile than NAT ABSOLUTE TECHNOLOGIES. It trades about 0.09 of its potential returns per unit of risk. NAT ABSOLUTE TECHNOLOGIES is currently generating about -0.19 per unit of risk. If you would invest  11,530  in Steel Dynamics on December 27, 2024 and sell it today you would earn a total of  1,269  from holding Steel Dynamics or generate 11.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Steel Dynamics  vs.  NAT ABSOLUTE TECHNOLOGIES

Steel Dynamics

Risk-Adjusted Performance

OK

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 may actually be approaching a critical reversion point that can send shares even higher in April 2025.

NAT ABSOLUTE TECHNOLOGIES

Risk-Adjusted Performance

Very Weak

Over the last 90 days NAT ABSOLUTE TECHNOLOGIES has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Steel Dynamics and NAT ABSOLUTE

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

The idea behind Steel Dynamics and NAT ABSOLUTE TECHNOLOGIES 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.