Correlation Between BlueScope Steel and LEGACY IRON
Can any of the company-specific risk be diversified away by investing in both BlueScope Steel and LEGACY IRON 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 LEGACY IRON 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 LEGACY IRON ORE, you can compare the effects of market volatilities on BlueScope Steel and LEGACY IRON 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 LEGACY IRON. Check out your portfolio center. Please also check ongoing floating volatility patterns of BlueScope Steel and LEGACY IRON.
Diversification Opportunities for BlueScope Steel and LEGACY IRON
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between BlueScope and LEGACY is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding BlueScope Steel Limited and LEGACY IRON ORE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LEGACY IRON ORE 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 LEGACY IRON. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LEGACY IRON ORE has no effect on the direction of BlueScope Steel i.e., BlueScope Steel and LEGACY IRON go up and down completely randomly.
Pair Corralation between BlueScope Steel and LEGACY IRON
If you would invest 1,280 in BlueScope Steel Limited on August 29, 2024 and sell it today you would earn a total of 30.00 from holding BlueScope Steel Limited or generate 2.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BlueScope Steel Limited vs. LEGACY IRON ORE
Performance |
| Timeline |
| BlueScope Steel |
| LEGACY IRON ORE |
BlueScope Steel and LEGACY IRON Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BlueScope Steel and LEGACY IRON
The main advantage of trading using opposite BlueScope Steel and LEGACY IRON positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BlueScope Steel position performs unexpectedly, LEGACY IRON 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 LEGACY IRON will offset losses from the drop in LEGACY IRON's long position.The idea behind BlueScope Steel Limited and LEGACY IRON ORE 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.| LEGACY IRON vs. Apple Inc | LEGACY IRON vs. Apple Inc | LEGACY IRON vs. Microsoft | LEGACY IRON vs. Microsoft |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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