Correlation Between BlueScope Steel and Nippon Steel
Can any of the company-specific risk be diversified away by investing in both BlueScope Steel and Nippon Steel 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 Nippon Steel 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 Nippon Steel, you can compare the effects of market volatilities on BlueScope Steel and Nippon Steel 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 Nippon Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of BlueScope Steel and Nippon Steel.
Diversification Opportunities for BlueScope Steel and Nippon Steel
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between BlueScope and Nippon is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding BlueScope Steel Limited and Nippon Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nippon Steel 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 Nippon Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nippon Steel has no effect on the direction of BlueScope Steel i.e., BlueScope Steel and Nippon Steel go up and down completely randomly.
Pair Corralation between BlueScope Steel and Nippon Steel
Assuming the 90 days horizon BlueScope Steel Limited is expected to generate 0.77 times more return on investment than Nippon Steel. However, BlueScope Steel Limited is 1.3 times less risky than Nippon Steel. It trades about 0.03 of its potential returns per unit of risk. Nippon Steel is currently generating about 0.01 per unit of risk. If you would invest 1,145 in BlueScope Steel Limited on September 1, 2024 and sell it today you would earn a total of 215.00 from holding BlueScope Steel Limited or generate 18.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.74% |
| Values | Daily Returns |
BlueScope Steel Limited vs. Nippon Steel
Performance |
| Timeline |
| BlueScope Steel |
| Nippon Steel |
BlueScope Steel and Nippon Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BlueScope Steel and Nippon Steel
The main advantage of trading using opposite BlueScope Steel and Nippon Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BlueScope Steel position performs unexpectedly, Nippon Steel 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 Nippon Steel will offset losses from the drop in Nippon Steel's long position.The idea behind BlueScope Steel Limited and Nippon Steel 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.| Nippon Steel vs. NURAN WIRELESS INC | Nippon Steel vs. Wyndham Hotels Resorts | Nippon Steel vs. Host Hotels Resorts | Nippon Steel vs. Infrastrutture Wireless Italiane |
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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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