Correlation Between Ta Chen and BlueScope Steel
Can any of the company-specific risk be diversified away by investing in both Ta Chen and BlueScope Steel 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 Ta Chen and BlueScope Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ta Chen Stainless and BlueScope Steel Ltd, you can compare the effects of market volatilities on Ta Chen and BlueScope Steel 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 Ta Chen with a short position of BlueScope Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ta Chen and BlueScope Steel.
Diversification Opportunities for Ta Chen and BlueScope Steel
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between 2027 and BlueScope is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Ta Chen Stainless and BlueScope Steel Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlueScope Steel and Ta Chen 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 Ta Chen Stainless are associated (or correlated) with BlueScope Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BlueScope Steel has no effect on the direction of Ta Chen i.e., Ta Chen and BlueScope Steel go up and down completely randomly.
Pair Corralation between Ta Chen and BlueScope Steel
Assuming the 90 days trading horizon Ta Chen Stainless is expected to under-perform the BlueScope Steel. But the stock apears to be less risky and, when comparing its historical volatility, Ta Chen Stainless is 1.77 times less risky than BlueScope Steel. The stock trades about -0.02 of its potential returns per unit of risk. The BlueScope Steel Ltd is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 5,842 in BlueScope Steel Ltd on September 3, 2024 and sell it today you would earn a total of 1,012 from holding BlueScope Steel Ltd or generate 17.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 98.76% |
| Values | Daily Returns |
Ta Chen Stainless vs. BlueScope Steel Ltd
Performance |
| Timeline |
| Ta Chen Stainless |
| BlueScope Steel |
Ta Chen and BlueScope Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ta Chen and BlueScope Steel
The main advantage of trading using opposite Ta Chen and BlueScope Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ta Chen position performs unexpectedly, BlueScope Steel 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 BlueScope Steel will offset losses from the drop in BlueScope Steel's long position.The idea behind Ta Chen Stainless and BlueScope Steel Ltd 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.| BlueScope Steel vs. Ta Chen Stainless | BlueScope Steel vs. Gerdau SA | BlueScope Steel vs. Gerdau SA | BlueScope Steel vs. Nucor Corp |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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