Correlation Between Bluescope Steel and Australia United
Can any of the company-specific risk be diversified away by investing in both Bluescope Steel and Australia United 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 Australia United into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bluescope Steel and Australia United Mining, you can compare the effects of market volatilities on Bluescope Steel and Australia United 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 Australia United. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bluescope Steel and Australia United.
Diversification Opportunities for Bluescope Steel and Australia United
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between Bluescope and Australia is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Bluescope Steel and Australia United Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australia United Mining 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 Australia United. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australia United Mining has no effect on the direction of Bluescope Steel i.e., Bluescope Steel and Australia United go up and down completely randomly.
Pair Corralation between Bluescope Steel and Australia United
Assuming the 90 days trading horizon Bluescope Steel is expected to generate 3.17 times less return on investment than Australia United. But when comparing it to its historical volatility, Bluescope Steel is 4.99 times less risky than Australia United. It trades about 0.05 of its potential returns per unit of risk. Australia United Mining is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 0.30 in Australia United Mining on September 13, 2024 and sell it today you would lose (0.10) from holding Australia United Mining or give up 33.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bluescope Steel vs. Australia United Mining
Performance |
| Timeline |
| Bluescope Steel |
| Australia United Mining |
Bluescope Steel and Australia United Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bluescope Steel and Australia United
The main advantage of trading using opposite Bluescope Steel and Australia United positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bluescope Steel position performs unexpectedly, Australia United 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 Australia United will offset losses from the drop in Australia United's long position.| Bluescope Steel vs. My Foodie Box | Bluescope Steel vs. Retail Food Group | Bluescope Steel vs. Perseus Mining | Bluescope Steel vs. Autosports Group |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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