Correlation Between Alto Metals and Bluescope Steel
Can any of the company-specific risk be diversified away by investing in both Alto Metals 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 Alto Metals and Bluescope Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alto Metals and Bluescope Steel, you can compare the effects of market volatilities on Alto Metals 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 Alto Metals with a short position of Bluescope Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alto Metals and Bluescope Steel.
Diversification Opportunities for Alto Metals and Bluescope Steel
0.17 | Correlation Coefficient |
Average diversification
The 3 months correlation between Alto and Bluescope is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Alto Metals and Bluescope Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bluescope Steel and Alto Metals 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 Alto Metals 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 Alto Metals i.e., Alto Metals and Bluescope Steel go up and down completely randomly.
Pair Corralation between Alto Metals and Bluescope Steel
Assuming the 90 days trading horizon Alto Metals is expected to generate 1.61 times more return on investment than Bluescope Steel. However, Alto Metals is 1.61 times more volatile than Bluescope Steel. It trades about 0.18 of its potential returns per unit of risk. Bluescope Steel is currently generating about 0.01 per unit of risk. If you would invest 6.50 in Alto Metals on August 25, 2024 and sell it today you would earn a total of 1.80 from holding Alto Metals or generate 27.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alto Metals vs. Bluescope Steel
Performance |
| Timeline |
| Alto Metals |
| Bluescope Steel |
Alto Metals and Bluescope Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alto Metals and Bluescope Steel
The main advantage of trading using opposite Alto Metals and Bluescope Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alto Metals 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.| Alto Metals vs. MFF Capital Investments | Alto Metals vs. Carlton Investments | Alto Metals vs. Regal Investment | Alto Metals vs. Spirit Telecom |
| 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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