Correlation Between Steel Dynamics and Jpmorgan Core

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

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

Diversification Opportunities for Steel Dynamics and Jpmorgan Core

0.82

Correlation Coefficient

Steel Dynamics  Jpmorgan Core

Very poor diversification

The 3 months correlation between Steel and Jpmorgan is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and Jpmorgan E Plus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jpmorgan E Plus 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 Jpmorgan Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jpmorgan E Plus has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and Jpmorgan Core go up and down completely randomly.

Pair Corralation between Steel Dynamics and Jpmorgan Core

Given the investment horizon of 90 days Steel Dynamics is expected to under-perform the Jpmorgan Core. In addition to that, Steel Dynamics is 6.99 times more volatile than Jpmorgan E Plus. It trades about -0.04 of its total potential returns per unit of risk. Jpmorgan E Plus is currently generating about 0.02 per unit of volatility. If you would invest  727.00  in Jpmorgan E Plus on December 2, 2024 and sell it today you would earn a total of  2.00  from holding Jpmorgan E Plus or generate 0.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Steel Dynamics  vs.  Jpmorgan E Plus

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.

Jpmorgan E Plus

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Jpmorgan E Plus are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Jpmorgan Core is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Steel Dynamics and Jpmorgan Core

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

The idea behind Steel Dynamics and Jpmorgan E Plus 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.