Correlation Between BLUESCOPE STEEL and Algonquin Power
Can any of the company-specific risk be diversified away by investing in both BLUESCOPE STEEL and Algonquin Power 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 Algonquin Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BLUESCOPE STEEL and Algonquin Power Utilities, you can compare the effects of market volatilities on BLUESCOPE STEEL and Algonquin Power 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 Algonquin Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of BLUESCOPE STEEL and Algonquin Power.
Diversification Opportunities for BLUESCOPE STEEL and Algonquin Power
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between BLUESCOPE and Algonquin is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding BLUESCOPE STEEL and Algonquin Power Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Algonquin Power Utilities 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 are associated (or correlated) with Algonquin Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Algonquin Power Utilities has no effect on the direction of BLUESCOPE STEEL i.e., BLUESCOPE STEEL and Algonquin Power go up and down completely randomly.
Pair Corralation between BLUESCOPE STEEL and Algonquin Power
Assuming the 90 days trading horizon BLUESCOPE STEEL is expected to generate 1.51 times more return on investment than Algonquin Power. However, BLUESCOPE STEEL is 1.51 times more volatile than Algonquin Power Utilities. It trades about -0.09 of its potential returns per unit of risk. Algonquin Power Utilities is currently generating about -0.17 per unit of risk. If you would invest 1,250 in BLUESCOPE STEEL on September 19, 2024 and sell it today you would lose (60.00) from holding BLUESCOPE STEEL or give up 4.8% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
BLUESCOPE STEEL vs. Algonquin Power Utilities
Performance |
| Timeline |
| BLUESCOPE STEEL |
| Algonquin Power Utilities |
BLUESCOPE STEEL and Algonquin Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BLUESCOPE STEEL and Algonquin Power
The main advantage of trading using opposite BLUESCOPE STEEL and Algonquin Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BLUESCOPE STEEL position performs unexpectedly, Algonquin Power 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 Algonquin Power will offset losses from the drop in Algonquin Power's long position.| BLUESCOPE STEEL vs. Apple Inc | BLUESCOPE STEEL vs. Apple Inc | BLUESCOPE STEEL vs. Apple Inc | BLUESCOPE STEEL vs. Apple Inc |
| Algonquin Power vs. ABO GROUP ENVIRONMENT | Algonquin Power vs. Singapore Airlines Limited | Algonquin Power vs. AEGEAN AIRLINES | Algonquin Power vs. BLUESCOPE STEEL |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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