Correlation Between SOLSTAD OFFSHORE and STEEL DYNAMICS

Can any of the company-specific risk be diversified away by investing in both SOLSTAD OFFSHORE and STEEL DYNAMICS 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 SOLSTAD OFFSHORE and STEEL DYNAMICS into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SOLSTAD OFFSHORE NK and STEEL DYNAMICS, you can compare the effects of market volatilities on SOLSTAD OFFSHORE and STEEL DYNAMICS 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 SOLSTAD OFFSHORE with a short position of STEEL DYNAMICS. Check out your portfolio center. Please also check ongoing floating volatility patterns of SOLSTAD OFFSHORE and STEEL DYNAMICS.

Diversification Opportunities for SOLSTAD OFFSHORE and STEEL DYNAMICS

-0.03

Correlation Coefficient

SOLSTAD OFFSHORE  STEEL DYNAMICS

Good diversification

The 3 months correlation between SOLSTAD and STEEL is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding SOLSTAD OFFSHORE NK and STEEL DYNAMICS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STEEL DYNAMICS and SOLSTAD OFFSHORE 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 SOLSTAD OFFSHORE NK are associated (or correlated) with STEEL DYNAMICS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STEEL DYNAMICS has no effect on the direction of SOLSTAD OFFSHORE i.e., SOLSTAD OFFSHORE and STEEL DYNAMICS go up and down completely randomly.

Pair Corralation between SOLSTAD OFFSHORE and STEEL DYNAMICS

Assuming the 90 days horizon SOLSTAD OFFSHORE is expected to generate 1.02 times less return on investment than STEEL DYNAMICS. In addition to that, SOLSTAD OFFSHORE is 1.92 times more volatile than STEEL DYNAMICS. It trades about 0.01 of its total potential returns per unit of risk. STEEL DYNAMICS is currently generating about 0.03 per unit of volatility. If you would invest  9,559  in STEEL DYNAMICS on October 11, 2024 and sell it today you would earn a total of  1,973  from holding STEEL DYNAMICS or generate 20.64% return on investment over 90 days.

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

SOLSTAD OFFSHORE NK  vs.  STEEL DYNAMICS

SOLSTAD OFFSHORE

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SOLSTAD OFFSHORE NK are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, SOLSTAD OFFSHORE reported solid returns over the last few months and may actually be approaching a breakup point.

STEEL DYNAMICS

Risk-Adjusted Performance

0 of 100

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 comparatively stable basic indicators, STEEL DYNAMICS is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with SOLSTAD OFFSHORE and STEEL DYNAMICS

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

The idea behind SOLSTAD OFFSHORE NK and STEEL DYNAMICS 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.