Correlation Between Steel Dynamics and Nevada King

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

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

Diversification Opportunities for Steel Dynamics and Nevada King

-0.05

Correlation Coefficient

Steel Dynamics  Nevada King

Good diversification

The 3 months correlation between Steel and Nevada is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and Nevada King Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nevada King Gold 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 Nevada King. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nevada King Gold has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and Nevada King go up and down completely randomly.

Pair Corralation between Steel Dynamics and Nevada King

Given the investment horizon of 90 days Steel Dynamics is expected to generate 0.53 times more return on investment than Nevada King. However, Steel Dynamics is 1.87 times less risky than Nevada King. It trades about 0.11 of its potential returns per unit of risk. Nevada King Gold is currently generating about 0.02 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 Against
Strength	Insignificant
Accuracy	96.77%
Values	Daily Returns

Steel Dynamics  vs.  Nevada King Gold

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.

Nevada King Gold

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nevada King Gold are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Nevada King is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Steel Dynamics and Nevada King

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

The idea behind Steel Dynamics and Nevada King Gold 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.