Correlation Between Steel Dynamics and North Bud

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

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

Diversification Opportunities for Steel Dynamics and North Bud

0.0

Correlation Coefficient

Steel Dynamics  North Bud

Pay attention - limited upside

The 3 months correlation between Steel and North is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and North Bud Farms in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North Bud Farms 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 North Bud. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North Bud Farms has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and North Bud go up and down completely randomly.

Pair Corralation between Steel Dynamics and North Bud

If you would invest  12,820  in Steel Dynamics on December 2, 2024 and sell it today you would earn a total of  687.00  from holding Steel Dynamics or generate 5.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Steel Dynamics  vs.  North Bud Farms

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.

North Bud Farms

Risk-Adjusted Performance

Very Weak

Over the last 90 days North Bud Farms has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, North Bud is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Steel Dynamics and North Bud

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

The idea behind Steel Dynamics and North Bud Farms 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.