Correlation Between Steel Dynamics and Vanguard Global

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

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

Diversification Opportunities for Steel Dynamics and Vanguard Global

0.57

Correlation Coefficient

Steel Dynamics  Vanguard Global

Very weak diversification

The 3 months correlation between Steel and Vanguard is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and Vanguard Global Wellesley in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Global Wellesley 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 Vanguard Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Global Wellesley has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and Vanguard Global go up and down completely randomly.

Pair Corralation between Steel Dynamics and Vanguard Global

Given the investment horizon of 90 days Steel Dynamics is expected to generate 7.27 times more return on investment than Vanguard Global. However, Steel Dynamics is 7.27 times more volatile than Vanguard Global Wellesley. It trades about 0.08 of its potential returns per unit of risk. Vanguard Global Wellesley is currently generating about 0.18 per unit of risk. If you would invest  11,334  in Steel Dynamics on December 29, 2024 and sell it today you would earn a total of  1,063  from holding Steel Dynamics or generate 9.38% return on investment over 90 days.

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

Steel Dynamics  vs.  Vanguard Global Wellesley

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.

Vanguard Global Wellesley

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Global Wellesley are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Vanguard Global 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 Vanguard Global

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

The idea behind Steel Dynamics and Vanguard Global Wellesley 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 Stocks Directory module to find actively traded stocks across global markets.