Correlation Between Steel Dynamics and Sinar Mas

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

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

Diversification Opportunities for Steel Dynamics and Sinar Mas

0.56

Correlation Coefficient

Steel Dynamics  Sinar Mas

Very weak diversification

The 3 months correlation between Steel and Sinar is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and Sinar Mas Multiartha in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sinar Mas Multiartha 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 Sinar Mas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sinar Mas Multiartha has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and Sinar Mas go up and down completely randomly.

Pair Corralation between Steel Dynamics and Sinar Mas

Given the investment horizon of 90 days Steel Dynamics is expected to generate 1.12 times less return on investment than Sinar Mas. But when comparing it to its historical volatility, Steel Dynamics is 1.02 times less risky than Sinar Mas. It trades about 0.03 of its potential returns per unit of risk. Sinar Mas Multiartha is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,270,000  in Sinar Mas Multiartha on December 1, 2024 and sell it today you would earn a total of  275,000  from holding Sinar Mas Multiartha or generate 21.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	94.74%
Values	Daily Returns

Steel Dynamics  vs.  Sinar Mas Multiartha

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.

Sinar Mas Multiartha

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sinar Mas Multiartha are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Sinar Mas may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Steel Dynamics and Sinar Mas

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

The idea behind Steel Dynamics and Sinar Mas Multiartha 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.

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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..