Correlation Between Steel Dynamics and 84859DAA5

Can any of the company-specific risk be diversified away by investing in both Steel Dynamics and 84859DAA5 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 84859DAA5 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Steel Dynamics and SR 33 01 JUN 51, you can compare the effects of market volatilities on Steel Dynamics and 84859DAA5 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 84859DAA5. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and 84859DAA5.

Diversification Opportunities for Steel Dynamics and 84859DAA5

0.37

Correlation Coefficient

Steel Dynamics  84859DAA5

Weak diversification

The 3 months correlation between Steel and 84859DAA5 is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and SR 33 01 JUN 51 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 84859DAA5 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 84859DAA5. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 84859DAA5 has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and 84859DAA5 go up and down completely randomly.

Pair Corralation between Steel Dynamics and 84859DAA5

Given the investment horizon of 90 days Steel Dynamics is expected to generate 3.45 times less return on investment than 84859DAA5. But when comparing it to its historical volatility, Steel Dynamics is 1.09 times less risky than 84859DAA5. It trades about 0.08 of its potential returns per unit of risk. SR 33 01 JUN 51 is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  6,776  in SR 33 01 JUN 51 on December 29, 2024 and sell it today you would earn a total of  511.00  from holding SR 33 01 JUN 51 or generate 7.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	21.31%
Values	Daily Returns

Steel Dynamics  vs.  SR 33 01 JUN 51

Steel Dynamics

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Steel Dynamics are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile essential indicators, Steel Dynamics may actually be approaching a critical reversion point that can send shares even higher in April 2025.

84859DAA5

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SR 33 01 JUN 51 are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile basic indicators, 84859DAA5 sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Steel Dynamics and 84859DAA5

The main advantage of trading using opposite Steel Dynamics and 84859DAA5 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics position performs unexpectedly, 84859DAA5 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 84859DAA5 will offset losses from the drop in 84859DAA5's long position.

The idea behind Steel Dynamics and SR 33 01 JUN 51 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.