Correlation Between Steel Dynamics and Chimera Investment

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

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

Diversification Opportunities for Steel Dynamics and Chimera Investment

0.05

Correlation Coefficient

Steel Dynamics  Chimera Investment

Significant diversification

The 3 months correlation between Steel and Chimera is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and Chimera Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chimera Investment 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 Chimera Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chimera Investment has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and Chimera Investment go up and down completely randomly.

Pair Corralation between Steel Dynamics and Chimera Investment

Given the investment horizon of 90 days Steel Dynamics is expected to under-perform the Chimera Investment. In addition to that, Steel Dynamics is 3.74 times more volatile than Chimera Investment. It trades about -0.17 of its total potential returns per unit of risk. Chimera Investment is currently generating about 0.07 per unit of volatility. If you would invest  2,473  in Chimera Investment on March 2, 2024 and sell it today you would earn a total of  27.00  from holding Chimera Investment or generate 1.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	97.73%
Values	Daily Returns

Steel Dynamics  vs.  Chimera Investment

Steel Dynamics

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Steel Dynamics are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, Steel Dynamics is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Chimera Investment

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chimera Investment are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong primary indicators, Chimera Investment is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Steel Dynamics and Chimera Investment

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

The idea behind Steel Dynamics and Chimera Investment 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.