Correlation Between Steel Dynamics and Opko Health
Can any of the company-specific risk be diversified away by investing in both Steel Dynamics and Opko Health 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 Opko Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Dynamics and Opko Health, you can compare the effects of market volatilities on Steel Dynamics and Opko Health 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 Opko Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and Opko Health.
Diversification Opportunities for Steel Dynamics and Opko Health
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Steel and Opko is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and Opko Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Opko Health 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 Opko Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Opko Health has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and Opko Health go up and down completely randomly.
Pair Corralation between Steel Dynamics and Opko Health
Given the investment horizon of 90 days Steel Dynamics is expected to generate 3.12 times less return on investment than Opko Health. But when comparing it to its historical volatility, Steel Dynamics is 2.06 times less risky than Opko Health. It trades about 0.12 of its potential returns per unit of risk. Opko Health is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 36,400 in Opko Health on January 26, 2024 and sell it today you would earn a total of 11,470 from holding Opko Health or generate 31.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 77.42% |
| Values | Daily Returns |
Steel Dynamics vs. Opko Health
Performance |
| Timeline |
| Steel Dynamics |
| Opko Health |
Steel Dynamics and Opko Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Steel Dynamics and Opko Health
The main advantage of trading using opposite Steel Dynamics and Opko Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics position performs unexpectedly, Opko Health 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 Opko Health will offset losses from the drop in Opko Health's long position.| Steel Dynamics vs. Cleveland Cliffs | Steel Dynamics vs. Reliance Steel Aluminum | Steel Dynamics vs. Ternium SA ADR |
| Opko Health vs. Teva Pharmaceutical Industries | Opko Health vs. Tower Semiconductor | Opko Health vs. Nice | Opko Health vs. Kamada |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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