Correlation Between Bluescope Steel and Carnegie Clean
Can any of the company-specific risk be diversified away by investing in both Bluescope Steel and Carnegie Clean 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 Carnegie Clean into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bluescope Steel and Carnegie Clean Energy, you can compare the effects of market volatilities on Bluescope Steel and Carnegie Clean 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 Carnegie Clean. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bluescope Steel and Carnegie Clean.
Diversification Opportunities for Bluescope Steel and Carnegie Clean
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Bluescope and Carnegie is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Bluescope Steel and Carnegie Clean Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carnegie Clean Energy 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 Carnegie Clean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carnegie Clean Energy has no effect on the direction of Bluescope Steel i.e., Bluescope Steel and Carnegie Clean go up and down completely randomly.
Pair Corralation between Bluescope Steel and Carnegie Clean
Assuming the 90 days trading horizon Bluescope Steel is expected to generate 46.68 times less return on investment than Carnegie Clean. But when comparing it to its historical volatility, Bluescope Steel is 15.52 times less risky than Carnegie Clean. It trades about 0.03 of its potential returns per unit of risk. Carnegie Clean Energy is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 7.50 in Carnegie Clean Energy on August 28, 2024 and sell it today you would lose (3.50) from holding Carnegie Clean Energy or give up 46.67% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bluescope Steel vs. Carnegie Clean Energy
Performance |
| Timeline |
| Bluescope Steel |
| Carnegie Clean Energy |
Bluescope Steel and Carnegie Clean Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bluescope Steel and Carnegie Clean
The main advantage of trading using opposite Bluescope Steel and Carnegie Clean positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bluescope Steel position performs unexpectedly, Carnegie Clean 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 Carnegie Clean will offset losses from the drop in Carnegie Clean's long position.| Bluescope Steel vs. Carnegie Clean Energy | Bluescope Steel vs. Energy Technologies Limited | Bluescope Steel vs. Ras Technology Holdings | Bluescope Steel vs. ACDC Metals |
| Carnegie Clean vs. Dexus Convenience Retail | Carnegie Clean vs. Dug Technology | Carnegie Clean vs. Advanced Braking Technology | Carnegie Clean vs. Seven West Media |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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