Correlation Between Steel Dynamics and American Funds
Can any of the company-specific risk be diversified away by investing in both Steel Dynamics and American Funds 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 American Funds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Dynamics and American Funds Tax Exempt, you can compare the effects of market volatilities on Steel Dynamics and American Funds 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 American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and American Funds.
Diversification Opportunities for Steel Dynamics and American Funds
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Steel and American is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and American Funds Tax Exempt in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds Tax 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 American Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Funds Tax has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and American Funds go up and down completely randomly.
Pair Corralation between Steel Dynamics and American Funds
Given the investment horizon of 90 days Steel Dynamics is expected to generate 17.46 times more return on investment than American Funds. However, Steel Dynamics is 17.46 times more volatile than American Funds Tax Exempt. It trades about 0.04 of its potential returns per unit of risk. American Funds Tax Exempt is currently generating about 0.1 per unit of risk. If you would invest 10,179 in Steel Dynamics on September 11, 2024 and sell it today you would earn a total of 3,646 from holding Steel Dynamics or generate 35.82% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Steel Dynamics vs. American Funds Tax Exempt
Performance |
Timeline |
Steel Dynamics |
American Funds Tax |
Steel Dynamics and American Funds Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Steel Dynamics and American Funds
The main advantage of trading using opposite Steel Dynamics and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics position performs unexpectedly, American Funds 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 American Funds will offset losses from the drop in American Funds' long position.Steel Dynamics vs. Cleveland Cliffs | Steel Dynamics vs. United States Steel | Steel Dynamics vs. ArcelorMittal SA ADR | Steel Dynamics vs. Reliance Steel Aluminum |
American Funds vs. American Funds Growth | American Funds vs. American Funds Preservation | American Funds vs. American Funds Balanced | American Funds vs. American Funds Income |
Check out your portfolio center.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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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