Correlation Between Bluescope Steel and Stelar Metals
Can any of the company-specific risk be diversified away by investing in both Bluescope Steel and Stelar Metals 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 Stelar Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bluescope Steel and Stelar Metals, you can compare the effects of market volatilities on Bluescope Steel and Stelar Metals 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 Stelar Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bluescope Steel and Stelar Metals.
Diversification Opportunities for Bluescope Steel and Stelar Metals
-0.19 | Correlation Coefficient |
Good diversification
The 3 months correlation between Bluescope and Stelar is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Bluescope Steel and Stelar Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stelar Metals 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 Stelar Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stelar Metals has no effect on the direction of Bluescope Steel i.e., Bluescope Steel and Stelar Metals go up and down completely randomly.
Pair Corralation between Bluescope Steel and Stelar Metals
Assuming the 90 days trading horizon Bluescope Steel is expected to generate 0.33 times more return on investment than Stelar Metals. However, Bluescope Steel is 2.99 times less risky than Stelar Metals. It trades about 0.0 of its potential returns per unit of risk. Stelar Metals is currently generating about -0.05 per unit of risk. If you would invest 2,278 in Bluescope Steel on August 29, 2024 and sell it today you would lose (35.00) from holding Bluescope Steel or give up 1.54% 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. Stelar Metals
Performance |
| Timeline |
| Bluescope Steel |
| Stelar Metals |
Bluescope Steel and Stelar Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bluescope Steel and Stelar Metals
The main advantage of trading using opposite Bluescope Steel and Stelar Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bluescope Steel position performs unexpectedly, Stelar Metals 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 Stelar Metals will offset losses from the drop in Stelar Metals' 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 |
| Stelar Metals vs. Northern Star Resources | Stelar Metals vs. Evolution Mining | Stelar Metals vs. Bluescope Steel | Stelar Metals 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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