Correlation Between Bluescope Steel and Lynas Rare
Can any of the company-specific risk be diversified away by investing in both Bluescope Steel and Lynas Rare 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 Lynas Rare into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bluescope Steel and Lynas Rare Earths, you can compare the effects of market volatilities on Bluescope Steel and Lynas Rare 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 Lynas Rare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bluescope Steel and Lynas Rare.
Diversification Opportunities for Bluescope Steel and Lynas Rare
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bluescope and Lynas is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Bluescope Steel and Lynas Rare Earths in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lynas Rare Earths 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 Lynas Rare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lynas Rare Earths has no effect on the direction of Bluescope Steel i.e., Bluescope Steel and Lynas Rare go up and down completely randomly.
Pair Corralation between Bluescope Steel and Lynas Rare
Assuming the 90 days trading horizon Bluescope Steel is expected to generate 1.66 times more return on investment than Lynas Rare. However, Bluescope Steel is 1.66 times more volatile than Lynas Rare Earths. It trades about 0.14 of its potential returns per unit of risk. Lynas Rare Earths is currently generating about -0.33 per unit of risk. If you would invest 2,053 in Bluescope Steel on August 31, 2024 and sell it today you would earn a total of 159.00 from holding Bluescope Steel or generate 7.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Bluescope Steel vs. Lynas Rare Earths
Performance |
| Timeline |
| Bluescope Steel |
| Lynas Rare Earths |
Bluescope Steel and Lynas Rare Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bluescope Steel and Lynas Rare
The main advantage of trading using opposite Bluescope Steel and Lynas Rare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bluescope Steel position performs unexpectedly, Lynas Rare 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 Lynas Rare will offset losses from the drop in Lynas Rare's long position.| Bluescope Steel vs. Northern Star Resources | Bluescope Steel vs. Evolution Mining | Bluescope Steel vs. De Grey Mining |
| Lynas Rare vs. ACDC Metals | Lynas Rare vs. Premier Investments | Lynas Rare vs. Aeon Metals | Lynas Rare vs. Skycity Entertainment 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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