Correlation Between Steel Dynamics and Surge Battery

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

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

Diversification Opportunities for Steel Dynamics and Surge Battery

0.3

Correlation Coefficient

Steel Dynamics  Surge Battery

Weak diversification

The 3 months correlation between Steel and Surge is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and Surge Battery Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Surge Battery Metals 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 Surge Battery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Surge Battery Metals has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and Surge Battery go up and down completely randomly.

Pair Corralation between Steel Dynamics and Surge Battery

Given the investment horizon of 90 days Steel Dynamics is expected to generate 0.47 times more return on investment than Surge Battery. However, Steel Dynamics is 2.11 times less risky than Surge Battery. It trades about 0.11 of its potential returns per unit of risk. Surge Battery Metals is currently generating about 0.05 per unit of risk. If you would invest  11,334  in Steel Dynamics on December 28, 2024 and sell it today you would earn a total of  1,500  from holding Steel Dynamics or generate 13.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.77%
Values	Daily Returns

Steel Dynamics  vs.  Surge Battery Metals

Steel Dynamics

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Steel Dynamics are ranked lower than 8 (%) 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.

Surge Battery Metals

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Surge Battery Metals are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward indicators, Surge Battery reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Steel Dynamics and Surge Battery

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

The idea behind Steel Dynamics and Surge Battery Metals 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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.