Correlation Between Bluescope Steel and Red Hill
Can any of the company-specific risk be diversified away by investing in both Bluescope Steel and Red Hill 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 Red Hill into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bluescope Steel and Red Hill Iron, you can compare the effects of market volatilities on Bluescope Steel and Red Hill 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 Red Hill. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bluescope Steel and Red Hill.
Diversification Opportunities for Bluescope Steel and Red Hill
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bluescope and Red is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Bluescope Steel and Red Hill Iron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Red Hill Iron 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 Red Hill. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Red Hill Iron has no effect on the direction of Bluescope Steel i.e., Bluescope Steel and Red Hill go up and down completely randomly.
Pair Corralation between Bluescope Steel and Red Hill
Assuming the 90 days trading horizon Bluescope Steel is expected to generate 1.05 times more return on investment than Red Hill. However, Bluescope Steel is 1.05 times more volatile than Red Hill Iron. It trades about 0.16 of its potential returns per unit of risk. Red Hill Iron is currently generating about 0.14 per unit of risk. If you would invest 2,031 in Bluescope Steel on September 1, 2024 and sell it today you would earn a total of 182.00 from holding Bluescope Steel or generate 8.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bluescope Steel vs. Red Hill Iron
Performance |
| Timeline |
| Bluescope Steel |
| Red Hill Iron |
Bluescope Steel and Red Hill Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bluescope Steel and Red Hill
The main advantage of trading using opposite Bluescope Steel and Red Hill positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bluescope Steel position performs unexpectedly, Red Hill 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 Red Hill will offset losses from the drop in Red Hill's long position.| Bluescope Steel vs. Advanced Braking Technology | Bluescope Steel vs. Queste Communications | Bluescope Steel vs. Singular Health Group | Bluescope Steel vs. Regis Healthcare |
| Red Hill vs. Northern Star Resources | Red Hill vs. Evolution Mining | Red Hill vs. Bluescope Steel | Red Hill 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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