Correlation Between Archer Daniels and Steel Dynamics
Can any of the company-specific risk be diversified away by investing in both Archer Daniels 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 Archer Daniels and Steel Dynamics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Archer Daniels Midland and Steel Dynamics, you can compare the effects of market volatilities on Archer Daniels 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 Archer Daniels with a short position of Steel Dynamics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Archer Daniels and Steel Dynamics.
Diversification Opportunities for Archer Daniels and Steel Dynamics
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Archer and Steel is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Archer Daniels Midland and Steel Dynamics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steel Dynamics and Archer Daniels 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 Archer Daniels Midland 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 Archer Daniels i.e., Archer Daniels and Steel Dynamics go up and down completely randomly.
Pair Corralation between Archer Daniels and Steel Dynamics
Considering the 90-day investment horizon Archer Daniels Midland is expected to generate 1.23 times more return on investment than Steel Dynamics. However, Archer Daniels is 1.23 times more volatile than Steel Dynamics. It trades about 0.08 of its potential returns per unit of risk. Steel Dynamics is currently generating about -0.17 per unit of risk. If you would invest 6,131 in Archer Daniels Midland on January 20, 2024 and sell it today you would earn a total of 129.00 from holding Archer Daniels Midland or generate 2.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Archer Daniels Midland vs. Steel Dynamics
Performance |
| Timeline |
| Archer Daniels Midland |
| Steel Dynamics |
Archer Daniels and Steel Dynamics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Archer Daniels and Steel Dynamics
The main advantage of trading using opposite Archer Daniels and Steel Dynamics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Archer Daniels 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' long position.| Archer Daniels vs. Tyson Foods | Archer Daniels vs. Cal Maine Foods | Archer Daniels vs. Dole PLC | Archer Daniels vs. Adecoagro SA |
| Steel Dynamics vs. Cleveland Cliffs | Steel Dynamics vs. United States Steel | Steel Dynamics vs. ArcelorMittal SA ADR | Steel Dynamics vs. Reliance Steel Aluminum |
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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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