Correlation Between Bluescope Steel and Energy Technologies
Can any of the company-specific risk be diversified away by investing in both Bluescope Steel and Energy Technologies 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 Energy Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bluescope Steel and Energy Technologies Limited, you can compare the effects of market volatilities on Bluescope Steel and Energy Technologies 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 Energy Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bluescope Steel and Energy Technologies.
Diversification Opportunities for Bluescope Steel and Energy Technologies
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Bluescope and Energy is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Bluescope Steel and Energy Technologies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy Technologies 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 Energy Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy Technologies has no effect on the direction of Bluescope Steel i.e., Bluescope Steel and Energy Technologies go up and down completely randomly.
Pair Corralation between Bluescope Steel and Energy Technologies
Assuming the 90 days trading horizon Bluescope Steel is expected to generate 0.72 times more return on investment than Energy Technologies. However, Bluescope Steel is 1.4 times less risky than Energy Technologies. It trades about 0.03 of its potential returns per unit of risk. Energy Technologies Limited is currently generating about -0.03 per unit of risk. If you would invest 2,083 in Bluescope Steel on August 29, 2024 and sell it today you would earn a total of 160.00 from holding Bluescope Steel or generate 7.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.6% |
| Values | Daily Returns |
Bluescope Steel vs. Energy Technologies Limited
Performance |
| Timeline |
| Bluescope Steel |
| Energy Technologies |
Bluescope Steel and Energy Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bluescope Steel and Energy Technologies
The main advantage of trading using opposite Bluescope Steel and Energy Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bluescope Steel position performs unexpectedly, Energy Technologies 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 Energy Technologies will offset losses from the drop in Energy Technologies' 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 |
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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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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