Correlation Between BlueScope Steel and POSCO Holdings
Can any of the company-specific risk be diversified away by investing in both BlueScope Steel and POSCO Holdings 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 POSCO Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BlueScope Steel Ltd and POSCO Holdings, you can compare the effects of market volatilities on BlueScope Steel and POSCO Holdings 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 POSCO Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of BlueScope Steel and POSCO Holdings.
Diversification Opportunities for BlueScope Steel and POSCO Holdings
-0.09 | Correlation Coefficient |
Good diversification
The 3 months correlation between BlueScope and POSCO is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding BlueScope Steel Ltd and POSCO Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on POSCO Holdings 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 Ltd are associated (or correlated) with POSCO Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of POSCO Holdings has no effect on the direction of BlueScope Steel i.e., BlueScope Steel and POSCO Holdings go up and down completely randomly.
Pair Corralation between BlueScope Steel and POSCO Holdings
Assuming the 90 days horizon BlueScope Steel Ltd is expected to generate 1.01 times more return on investment than POSCO Holdings. However, BlueScope Steel is 1.01 times more volatile than POSCO Holdings. It trades about 0.03 of its potential returns per unit of risk. POSCO Holdings is currently generating about 0.01 per unit of risk. If you would invest 5,707 in BlueScope Steel Ltd on August 28, 2024 and sell it today you would earn a total of 1,172 from holding BlueScope Steel Ltd or generate 20.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 97.9% |
| Values | Daily Returns |
BlueScope Steel Ltd vs. POSCO Holdings
Performance |
| Timeline |
| BlueScope Steel |
| POSCO Holdings |
BlueScope Steel and POSCO Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BlueScope Steel and POSCO Holdings
The main advantage of trading using opposite BlueScope Steel and POSCO Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BlueScope Steel position performs unexpectedly, POSCO Holdings 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 POSCO Holdings will offset losses from the drop in POSCO Holdings' long position.| BlueScope Steel vs. Olympic Steel | BlueScope Steel vs. Mesabi Trust | BlueScope Steel vs. Universal Stainless Alloy | BlueScope Steel vs. POSCO Holdings |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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