Correlation Between Air New and Bluescope Steel
Can any of the company-specific risk be diversified away by investing in both Air New 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 Air New and Bluescope Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Air New Zealand and Bluescope Steel, you can compare the effects of market volatilities on Air New 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 Air New with a short position of Bluescope Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air New and Bluescope Steel.
Diversification Opportunities for Air New and Bluescope Steel
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between Air and Bluescope is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Air New Zealand and Bluescope Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bluescope Steel and Air New 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 Air New Zealand 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 Air New i.e., Air New and Bluescope Steel go up and down completely randomly.
Pair Corralation between Air New and Bluescope Steel
Assuming the 90 days trading horizon Air New Zealand is expected to under-perform the Bluescope Steel. But the stock apears to be less risky and, when comparing its historical volatility, Air New Zealand is 1.19 times less risky than Bluescope Steel. The stock trades about -0.03 of its potential returns per unit of risk. The Bluescope Steel is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 2,059 in Bluescope Steel on September 4, 2024 and sell it today you would earn a total of 159.00 from holding Bluescope Steel or generate 7.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Air New Zealand vs. Bluescope Steel
Performance |
| Timeline |
| Air New Zealand |
| Bluescope Steel |
Air New and Bluescope Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air New and Bluescope Steel
The main advantage of trading using opposite Air New and Bluescope Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air New 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.| Air New vs. Aneka Tambang Tbk | Air New vs. Macquarie Group | Air New vs. Macquarie Group Ltd | Air New vs. Challenger |
| Bluescope Steel vs. Northern Star Resources | Bluescope Steel vs. Evolution Mining | Bluescope Steel vs. Sandfire Resources NL | Bluescope Steel vs. Aneka Tambang Tbk |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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