Correlation Between Steel Dynamics and Capital Income
Can any of the company-specific risk be diversified away by investing in both Steel Dynamics and Capital Income 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 Capital Income into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Dynamics and Capital Income Builder, you can compare the effects of market volatilities on Steel Dynamics and Capital Income 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 Capital Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and Capital Income.
Diversification Opportunities for Steel Dynamics and Capital Income
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Steel and Capital is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and Capital Income Builder in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Income Builder 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 Capital Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Income Builder has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and Capital Income go up and down completely randomly.
Pair Corralation between Steel Dynamics and Capital Income
Given the investment horizon of 90 days Steel Dynamics is expected to under-perform the Capital Income. In addition to that, Steel Dynamics is 3.03 times more volatile than Capital Income Builder. It trades about -0.04 of its total potential returns per unit of risk. Capital Income Builder is currently generating about 0.02 per unit of volatility. If you would invest 7,228 in Capital Income Builder on December 2, 2024 and sell it today you would earn a total of 56.00 from holding Capital Income Builder or generate 0.77% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Steel Dynamics vs. Capital Income Builder
Performance |
Timeline |
Steel Dynamics |
Capital Income Builder |
Steel Dynamics and Capital Income Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Steel Dynamics and Capital Income
The main advantage of trading using opposite Steel Dynamics and Capital Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics position performs unexpectedly, Capital Income 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 Capital Income will offset losses from the drop in Capital Income's long position.Steel Dynamics vs. Cleveland Cliffs | Steel Dynamics vs. United States Steel | Steel Dynamics vs. ArcelorMittal SA ADR | Steel Dynamics vs. Reliance Steel Aluminum |
Capital Income vs. Ab Small Cap | Capital Income vs. Touchstone Small Cap | Capital Income vs. Legg Mason Partners | Capital Income vs. Small Pany Growth |
Check out your portfolio center.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 Transaction History module to view history of all your transactions and understand their impact on performance.
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