Correlation Between BlueScope Steel and Tianjin Capital

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Can any of the company-specific risk be diversified away by investing in both BlueScope Steel and Tianjin Capital 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 Tianjin Capital 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 Tianjin Capital Environmental, you can compare the effects of market volatilities on BlueScope Steel and Tianjin Capital 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 Tianjin Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of BlueScope Steel and Tianjin Capital.

Diversification Opportunities for BlueScope Steel and Tianjin Capital

BlueScopeTianjinDiversified AwayBlueScopeTianjinDiversified Away100%
-0.39
  Correlation Coefficient

Very good diversification

The 3 months correlation between BlueScope and Tianjin is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding BlueScope Steel Limited and Tianjin Capital Environmental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tianjin Capital Envi 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 Tianjin Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tianjin Capital Envi has no effect on the direction of BlueScope Steel i.e., BlueScope Steel and Tianjin Capital go up and down completely randomly.

Pair Corralation between BlueScope Steel and Tianjin Capital

Assuming the 90 days horizon BlueScope Steel Limited is expected to generate 2.3 times more return on investment than Tianjin Capital. However, BlueScope Steel is 2.3 times more volatile than Tianjin Capital Environmental. It trades about 0.3 of its potential returns per unit of risk. Tianjin Capital Environmental is currently generating about 0.01 per unit of risk. If you would invest  1,200  in BlueScope Steel Limited on November 25, 2024 and sell it today you would earn a total of  270.00  from holding BlueScope Steel Limited or generate 22.5% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

BlueScope Steel Limited  vs.  Tianjin Capital Environmental

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -10-50510
JavaScript chart by amCharts 3.21.15BH5 TIA
       Timeline  
BlueScope Steel 

Risk-Adjusted Performance

Modest

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in BlueScope Steel Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, BlueScope Steel reported solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb11.51212.51313.51414.515
Tianjin Capital Envi 

Risk-Adjusted Performance

Weak

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Tianjin Capital Environmental are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Tianjin Capital is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb0.370.3750.380.3850.390.3950.4

BlueScope Steel and Tianjin Capital Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-7.88-5.9-3.92-1.940.03462.044.126.28.27 0.050.100.15
JavaScript chart by amCharts 3.21.15BH5 TIA
       Returns  

Pair Trading with BlueScope Steel and Tianjin Capital

The main advantage of trading using opposite BlueScope Steel and Tianjin Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BlueScope Steel position performs unexpectedly, Tianjin Capital 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 Tianjin Capital will offset losses from the drop in Tianjin Capital's long position.
The idea behind BlueScope Steel Limited and Tianjin Capital Environmental 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.
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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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.

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