Correlation Between Bluescope Steel and Austral Gold
Can any of the company-specific risk be diversified away by investing in both Bluescope Steel and Austral Gold 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 Austral Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bluescope Steel and Austral Gold, you can compare the effects of market volatilities on Bluescope Steel and Austral Gold 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 Austral Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bluescope Steel and Austral Gold.
Diversification Opportunities for Bluescope Steel and Austral Gold
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bluescope and Austral is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Bluescope Steel and Austral Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Austral Gold 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 Austral Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Austral Gold has no effect on the direction of Bluescope Steel i.e., Bluescope Steel and Austral Gold go up and down completely randomly.
Pair Corralation between Bluescope Steel and Austral Gold
Assuming the 90 days trading horizon Bluescope Steel is expected to generate 2.64 times less return on investment than Austral Gold. But when comparing it to its historical volatility, Bluescope Steel is 3.84 times less risky than Austral Gold. It trades about 0.03 of its potential returns per unit of risk. Austral Gold is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 2.80 in Austral Gold on August 25, 2024 and sell it today you would lose (0.50) from holding Austral Gold or give up 17.86% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bluescope Steel vs. Austral Gold
Performance |
| Timeline |
| Bluescope Steel |
| Austral Gold |
Bluescope Steel and Austral Gold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bluescope Steel and Austral Gold
The main advantage of trading using opposite Bluescope Steel and Austral Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bluescope Steel position performs unexpectedly, Austral Gold 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 Austral Gold will offset losses from the drop in Austral Gold's long position.| Bluescope Steel vs. Northern Star Resources | Bluescope Steel vs. Evolution Mining | Bluescope Steel vs. Sandfire Resources NL | Bluescope Steel vs. Aneka Tambang Tbk |
| Austral Gold vs. Northern Star Resources | Austral Gold vs. Evolution Mining | Austral Gold vs. Bluescope Steel | Austral Gold vs. Sandfire Resources NL |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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