Correlation Between BlueScope Steel and KONE Oyj
Can any of the company-specific risk be diversified away by investing in both BlueScope Steel and KONE Oyj 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 KONE Oyj 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 KONE Oyj, you can compare the effects of market volatilities on BlueScope Steel and KONE Oyj 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 KONE Oyj. Check out your portfolio center. Please also check ongoing floating volatility patterns of BlueScope Steel and KONE Oyj.
Diversification Opportunities for BlueScope Steel and KONE Oyj
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BlueScope and KONE is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding BlueScope Steel Limited and KONE Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KONE Oyj 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 KONE Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KONE Oyj has no effect on the direction of BlueScope Steel i.e., BlueScope Steel and KONE Oyj go up and down completely randomly.
Pair Corralation between BlueScope Steel and KONE Oyj
Assuming the 90 days horizon BlueScope Steel Limited is expected to generate 1.99 times more return on investment than KONE Oyj. However, BlueScope Steel is 1.99 times more volatile than KONE Oyj. It trades about 0.05 of its potential returns per unit of risk. KONE Oyj is currently generating about -0.17 per unit of risk. If you would invest 1,280 in BlueScope Steel Limited on August 28, 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 Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BlueScope Steel Limited vs. KONE Oyj
Performance |
| Timeline |
| BlueScope Steel |
| KONE Oyj |
BlueScope Steel and KONE Oyj Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BlueScope Steel and KONE Oyj
The main advantage of trading using opposite BlueScope Steel and KONE Oyj positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BlueScope Steel position performs unexpectedly, KONE Oyj 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 KONE Oyj will offset losses from the drop in KONE Oyj's long position.The idea behind BlueScope Steel Limited and KONE Oyj 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.| KONE Oyj vs. Chunghwa Telecom Co | KONE Oyj vs. Citic Telecom International | KONE Oyj vs. Ribbon Communications | KONE Oyj vs. Iridium Communications |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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