Correlation Between Steel Dynamics and Tiaa-cref Emerging

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

By analyzing existing cross correlation between Steel Dynamics and Tiaa Cref Emerging Markets, you can compare the effects of market volatilities on Steel Dynamics and Tiaa-cref Emerging 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 Tiaa-cref Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and Tiaa-cref Emerging.

Diversification Opportunities for Steel Dynamics and Tiaa-cref Emerging

0.65

Correlation Coefficient

Steel Dynamics  Tiaa-cref Emerging

Poor diversification

The 3 months correlation between Steel and TIAA-CREF is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and Tiaa Cref Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tiaa Cref Emerging 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 Tiaa-cref Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tiaa Cref Emerging has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and Tiaa-cref Emerging go up and down completely randomly.

Pair Corralation between Steel Dynamics and Tiaa-cref Emerging

Given the investment horizon of 90 days Steel Dynamics is expected to under-perform the Tiaa-cref Emerging. In addition to that, Steel Dynamics is 2.2 times more volatile than Tiaa Cref Emerging Markets. It trades about -0.04 of its total potential returns per unit of risk. Tiaa Cref Emerging Markets is currently generating about -0.01 per unit of volatility. If you would invest  805.00  in Tiaa Cref Emerging Markets on December 1, 2024 and sell it today you would lose (5.00) from holding Tiaa Cref Emerging Markets or give up 0.62% of portfolio value over 90 days.

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

Steel Dynamics  vs.  Tiaa Cref Emerging Markets

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.

Tiaa Cref Emerging

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tiaa Cref Emerging Markets has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical indicators, Tiaa-cref Emerging 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 Tiaa-cref Emerging

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

The idea behind Steel Dynamics and Tiaa Cref Emerging Markets 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.