Correlation Between LEGACY IRON and BlueScope Steel
Can any of the company-specific risk be diversified away by investing in both LEGACY IRON 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 LEGACY IRON and BlueScope Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LEGACY IRON ORE and BlueScope Steel Limited, you can compare the effects of market volatilities on LEGACY IRON 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 LEGACY IRON with a short position of BlueScope Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of LEGACY IRON and BlueScope Steel.
Diversification Opportunities for LEGACY IRON and BlueScope Steel
-0.09 | Correlation Coefficient |
Good diversification
The 3 months correlation between LEGACY and BlueScope is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding LEGACY IRON ORE and BlueScope Steel Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlueScope Steel and LEGACY IRON 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 LEGACY IRON ORE 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 LEGACY IRON i.e., LEGACY IRON and BlueScope Steel go up and down completely randomly.
Pair Corralation between LEGACY IRON and BlueScope Steel
Assuming the 90 days trading horizon LEGACY IRON ORE is expected to under-perform the BlueScope Steel. But the stock apears to be less risky and, when comparing its historical volatility, LEGACY IRON ORE is 1.39 times less risky than BlueScope Steel. The stock trades about -0.21 of its potential returns per unit of risk. The BlueScope Steel Limited is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 1,260 in BlueScope Steel Limited on August 25, 2024 and sell it today you would earn a total of 20.00 from holding BlueScope Steel Limited or generate 1.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
LEGACY IRON ORE vs. BlueScope Steel Limited
Performance |
| Timeline |
| LEGACY IRON ORE |
| BlueScope Steel |
LEGACY IRON and BlueScope Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LEGACY IRON and BlueScope Steel
The main advantage of trading using opposite LEGACY IRON and BlueScope Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LEGACY IRON 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.| LEGACY IRON vs. Insteel Industries | LEGACY IRON vs. Boiron SA | LEGACY IRON vs. SBM OFFSHORE | LEGACY IRON vs. Nippon Steel |
| BlueScope Steel vs. PRECISION DRILLING P | BlueScope Steel vs. TAL Education Group | BlueScope Steel vs. WILLIS LEASE FIN | BlueScope Steel vs. NorAm Drilling AS |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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