Correlation Between BlueScope Steel and CNH Industrial
Can any of the company-specific risk be diversified away by investing in both BlueScope Steel and CNH Industrial 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 BlueScope Steel and CNH Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BlueScope Steel Limited and CNH Industrial NV, you can compare the effects of market volatilities on BlueScope Steel and CNH Industrial 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 BlueScope Steel with a short position of CNH Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of BlueScope Steel and CNH Industrial.
Diversification Opportunities for BlueScope Steel and CNH Industrial
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BlueScope and CNH is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding BlueScope Steel Limited and CNH Industrial NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CNH Industrial NV and BlueScope Steel 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 BlueScope Steel Limited are associated (or correlated) with CNH Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CNH Industrial NV has no effect on the direction of BlueScope Steel i.e., BlueScope Steel and CNH Industrial go up and down completely randomly.
Pair Corralation between BlueScope Steel and CNH Industrial
Assuming the 90 days horizon BlueScope Steel Limited is expected to generate 2.79 times more return on investment than CNH Industrial. However, BlueScope Steel is 2.79 times more volatile than CNH Industrial NV. It trades about 0.28 of its potential returns per unit of risk. CNH Industrial NV is currently generating about -0.08 per unit of risk. If you would invest 1,235 in BlueScope Steel Limited on December 1, 2024 and sell it today you would earn a total of 255.00 from holding BlueScope Steel Limited or generate 20.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
BlueScope Steel Limited vs. CNH Industrial NV
Performance |
| Timeline |
| BlueScope Steel |
| CNH Industrial NV |
BlueScope Steel and CNH Industrial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BlueScope Steel and CNH Industrial
The main advantage of trading using opposite BlueScope Steel and CNH Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BlueScope Steel position performs unexpectedly, CNH Industrial 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 CNH Industrial will offset losses from the drop in CNH Industrial's long position.| BlueScope Steel vs. DISTRICT METALS | BlueScope Steel vs. GOLDQUEST MINING | BlueScope Steel vs. Stag Industrial | BlueScope Steel vs. Rocket Internet SE |
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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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