Correlation Between Steel Dynamics and GameStop Corp

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

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

Diversification Opportunities for Steel Dynamics and GameStop Corp

-0.27

Correlation Coefficient

Steel Dynamics  GameStop Corp

Very good diversification

The 3 months correlation between Steel and GameStop is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and GameStop Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GameStop Corp 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 GameStop Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GameStop Corp has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and GameStop Corp go up and down completely randomly.

Pair Corralation between Steel Dynamics and GameStop Corp

Assuming the 90 days trading horizon Steel Dynamics is expected to generate 0.02 times more return on investment than GameStop Corp. However, Steel Dynamics is 59.87 times less risky than GameStop Corp. It trades about 0.22 of its potential returns per unit of risk. GameStop Corp is currently generating about -0.19 per unit of risk. If you would invest  228,855  in Steel Dynamics on April 7, 2025 and sell it today you would earn a total of  945.00  from holding Steel Dynamics or generate 0.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Steel Dynamics  vs.  GameStop Corp

Steel Dynamics

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Steel Dynamics are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Steel Dynamics is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

GameStop Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days GameStop Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Steel Dynamics and GameStop Corp

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

The idea behind Steel Dynamics and GameStop Corp 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.