Correlation Between BlueScope Steel and CVS Health
Can any of the company-specific risk be diversified away by investing in both BlueScope Steel and CVS Health 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 CVS Health 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 CVS Health, you can compare the effects of market volatilities on BlueScope Steel and CVS Health 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 CVS Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of BlueScope Steel and CVS Health.
Diversification Opportunities for BlueScope Steel and CVS Health
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BlueScope and CVS is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding BlueScope Steel Limited and CVS Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVS Health 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 CVS Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVS Health has no effect on the direction of BlueScope Steel i.e., BlueScope Steel and CVS Health go up and down completely randomly.
Pair Corralation between BlueScope Steel and CVS Health
Assuming the 90 days horizon BlueScope Steel Limited is expected to generate 0.82 times more return on investment than CVS Health. However, BlueScope Steel Limited is 1.21 times less risky than CVS Health. It trades about 0.09 of its potential returns per unit of risk. CVS Health is currently generating about 0.07 per unit of risk. If you would invest 1,209 in BlueScope Steel Limited on September 3, 2024 and sell it today you would earn a total of 151.00 from holding BlueScope Steel Limited or generate 12.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BlueScope Steel Limited vs. CVS Health
Performance |
| Timeline |
| BlueScope Steel |
| CVS Health |
BlueScope Steel and CVS Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BlueScope Steel and CVS Health
The main advantage of trading using opposite BlueScope Steel and CVS Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BlueScope Steel position performs unexpectedly, CVS Health 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 CVS Health will offset losses from the drop in CVS Health's long position.| BlueScope Steel vs. ArcelorMittal | BlueScope Steel vs. Steel Dynamics | BlueScope Steel vs. NIPPON STEEL SPADR | BlueScope Steel vs. POSCO Holdings |
| CVS Health vs. GFL ENVIRONM | CVS Health vs. Reliance Steel Aluminum | CVS Health vs. Chunghwa Telecom Co | CVS Health vs. BlueScope Steel Limited |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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