Correlation Between BlueScope Steel and Cummins
Can any of the company-specific risk be diversified away by investing in both BlueScope Steel and Cummins 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 Cummins 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 Cummins, you can compare the effects of market volatilities on BlueScope Steel and Cummins 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 Cummins. Check out your portfolio center. Please also check ongoing floating volatility patterns of BlueScope Steel and Cummins.
Diversification Opportunities for BlueScope Steel and Cummins
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between BlueScope and Cummins is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding BlueScope Steel Limited and Cummins in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cummins 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 Cummins. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cummins has no effect on the direction of BlueScope Steel i.e., BlueScope Steel and Cummins go up and down completely randomly.
Pair Corralation between BlueScope Steel and Cummins
Assuming the 90 days horizon BlueScope Steel is expected to generate 7.11 times less return on investment than Cummins. In addition to that, BlueScope Steel is 2.01 times more volatile than Cummins. It trades about 0.01 of its total potential returns per unit of risk. Cummins is currently generating about 0.16 per unit of volatility. If you would invest 34,475 in Cummins on September 14, 2024 and sell it today you would earn a total of 1,335 from holding Cummins or generate 3.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BlueScope Steel Limited vs. Cummins
Performance |
| Timeline |
| BlueScope Steel |
| Cummins |
BlueScope Steel and Cummins Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BlueScope Steel and Cummins
The main advantage of trading using opposite BlueScope Steel and Cummins positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BlueScope Steel position performs unexpectedly, Cummins 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 Cummins will offset losses from the drop in Cummins' long position.| BlueScope Steel vs. ArcelorMittal | BlueScope Steel vs. NIPPON STEEL SPADR | BlueScope Steel vs. Reliance Steel Aluminum | BlueScope Steel vs. Superior Plus Corp |
| Cummins vs. BlueScope Steel Limited | Cummins vs. GLG LIFE TECH | Cummins vs. Playtech plc | Cummins vs. SOFI TECHNOLOGIES |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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