Correlation Between BlueScope Steel and S A P
Can any of the company-specific risk be diversified away by investing in both BlueScope Steel and S A P 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 S A P 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 SAP SE, you can compare the effects of market volatilities on BlueScope Steel and S A P 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 S A P. Check out your portfolio center. Please also check ongoing floating volatility patterns of BlueScope Steel and S A P.
Diversification Opportunities for BlueScope Steel and S A P
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between BlueScope and SAP is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding BlueScope Steel Limited and SAP SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SAP SE 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 S A P. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SAP SE has no effect on the direction of BlueScope Steel i.e., BlueScope Steel and S A P go up and down completely randomly.
Pair Corralation between BlueScope Steel and S A P
Assuming the 90 days horizon BlueScope Steel is expected to generate 2.45 times less return on investment than S A P. In addition to that, BlueScope Steel is 1.26 times more volatile than SAP SE. It trades about 0.05 of its total potential returns per unit of risk. SAP SE is currently generating about 0.14 per unit of volatility. If you would invest 12,763 in SAP SE on September 1, 2024 and sell it today you would earn a total of 9,712 from holding SAP SE or generate 76.09% 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. SAP SE
Performance |
| Timeline |
| BlueScope Steel |
| SAP SE |
BlueScope Steel and S A P Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BlueScope Steel and S A P
The main advantage of trading using opposite BlueScope Steel and S A P positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BlueScope Steel position performs unexpectedly, S A P 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 S A P will offset losses from the drop in S A P's long position.The idea behind BlueScope Steel Limited and SAP SE 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.| S A P vs. ANTA SPORTS PRODUCT | S A P vs. ATRESMEDIA | S A P vs. USWE SPORTS AB | S A P vs. Columbia Sportswear |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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