Correlation Between Steel Dynamics and SPDR SSGA

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

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

Diversification Opportunities for Steel Dynamics and SPDR SSGA

0.92

Correlation Coefficient

Steel Dynamics  SPDR SSGA

Almost no diversification

The 3 months correlation between Steel and SPDR is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and SPDR SSGA Gender in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SSGA Gender 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 SPDR SSGA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SSGA Gender has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and SPDR SSGA go up and down completely randomly.

Pair Corralation between Steel Dynamics and SPDR SSGA

Given the investment horizon of 90 days Steel Dynamics is expected to generate 1.01 times less return on investment than SPDR SSGA. In addition to that, Steel Dynamics is 2.7 times more volatile than SPDR SSGA Gender. It trades about 0.04 of its total potential returns per unit of risk. SPDR SSGA Gender is currently generating about 0.11 per unit of volatility. If you would invest  7,932  in SPDR SSGA Gender on September 4, 2024 and sell it today you would earn a total of  4,159  from holding SPDR SSGA Gender or generate 52.43% return on investment over 90 days.

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

Steel Dynamics  vs.  SPDR SSGA Gender

Steel Dynamics

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Steel Dynamics are ranked lower than 13 (%) 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.

SPDR SSGA Gender

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SSGA Gender are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical indicators, SPDR SSGA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Steel Dynamics and SPDR SSGA

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

The idea behind Steel Dynamics and SPDR SSGA Gender 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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.