Correlation Between Steel Dynamics and 686330AQ4

Can any of the company-specific risk be diversified away by investing in both Steel Dynamics and 686330AQ4 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 686330AQ4 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Steel Dynamics and ORIX 5 13 SEP 27, you can compare the effects of market volatilities on Steel Dynamics and 686330AQ4 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 686330AQ4. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and 686330AQ4.

Diversification Opportunities for Steel Dynamics and 686330AQ4

-0.47

Correlation Coefficient

Steel Dynamics  686330AQ4

Very good diversification

The 3 months correlation between Steel and 686330AQ4 is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and ORIX 5 13 SEP 27 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ORIX 5 13 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 686330AQ4. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ORIX 5 13 has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and 686330AQ4 go up and down completely randomly.

Pair Corralation between Steel Dynamics and 686330AQ4

Given the investment horizon of 90 days Steel Dynamics is expected to generate 4.74 times more return on investment than 686330AQ4. However, Steel Dynamics is 4.74 times more volatile than ORIX 5 13 SEP 27. It trades about 0.15 of its potential returns per unit of risk. ORIX 5 13 SEP 27 is currently generating about -0.05 per unit of risk. If you would invest  11,034  in Steel Dynamics on September 9, 2024 and sell it today you would earn a total of  2,656  from holding Steel Dynamics or generate 24.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	83.08%
Values	Daily Returns

Steel Dynamics  vs.  ORIX 5 13 SEP 27

Steel Dynamics

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Steel Dynamics are ranked lower than 11 (%) 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.

ORIX 5 13

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ORIX 5 13 SEP 27 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 686330AQ4 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 686330AQ4

The main advantage of trading using opposite Steel Dynamics and 686330AQ4 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics position performs unexpectedly, 686330AQ4 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 686330AQ4 will offset losses from the drop in 686330AQ4's long position.

The idea behind Steel Dynamics and ORIX 5 13 SEP 27 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.