Correlation Between BLUESCOPE STEEL and Caterpillar
Can any of the company-specific risk be diversified away by investing in both BLUESCOPE STEEL and Caterpillar 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 Caterpillar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BLUESCOPE STEEL and Caterpillar, you can compare the effects of market volatilities on BLUESCOPE STEEL and Caterpillar 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 Caterpillar. Check out your portfolio center. Please also check ongoing floating volatility patterns of BLUESCOPE STEEL and Caterpillar.
Diversification Opportunities for BLUESCOPE STEEL and Caterpillar
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BLUESCOPE and Caterpillar is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding BLUESCOPE STEEL and Caterpillar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caterpillar 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 Caterpillar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caterpillar has no effect on the direction of BLUESCOPE STEEL i.e., BLUESCOPE STEEL and Caterpillar go up and down completely randomly.
Pair Corralation between BLUESCOPE STEEL and Caterpillar
Assuming the 90 days trading horizon BLUESCOPE STEEL is expected to generate 1.1 times less return on investment than Caterpillar. In addition to that, BLUESCOPE STEEL is 1.01 times more volatile than Caterpillar. It trades about 0.26 of its total potential returns per unit of risk. Caterpillar is currently generating about 0.29 per unit of volatility. If you would invest 35,200 in Caterpillar on October 22, 2024 and sell it today you would earn a total of 2,400 from holding Caterpillar or generate 6.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BLUESCOPE STEEL vs. Caterpillar
Performance |
| Timeline |
| BLUESCOPE STEEL |
| Caterpillar |
BLUESCOPE STEEL and Caterpillar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BLUESCOPE STEEL and Caterpillar
The main advantage of trading using opposite BLUESCOPE STEEL and Caterpillar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BLUESCOPE STEEL position performs unexpectedly, Caterpillar 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 Caterpillar will offset losses from the drop in Caterpillar's long position.| BLUESCOPE STEEL vs. AWILCO DRILLING PLC | BLUESCOPE STEEL vs. Gaztransport Technigaz SA | BLUESCOPE STEEL vs. Air Transport Services | BLUESCOPE STEEL vs. Gold Road Resources |
| Caterpillar vs. Tower One Wireless | Caterpillar vs. United States Steel | Caterpillar vs. ANGANG STEEL H | Caterpillar vs. Mount Gibson Iron |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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