Correlation Between Bluescope Steel and WA1 Resources
Can any of the company-specific risk be diversified away by investing in both Bluescope Steel and WA1 Resources 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 WA1 Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bluescope Steel and WA1 Resources, you can compare the effects of market volatilities on Bluescope Steel and WA1 Resources 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 WA1 Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bluescope Steel and WA1 Resources.
Diversification Opportunities for Bluescope Steel and WA1 Resources
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Bluescope and WA1 is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Bluescope Steel and WA1 Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WA1 Resources 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 WA1 Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WA1 Resources has no effect on the direction of Bluescope Steel i.e., Bluescope Steel and WA1 Resources go up and down completely randomly.
Pair Corralation between Bluescope Steel and WA1 Resources
Assuming the 90 days trading horizon Bluescope Steel is expected to generate 2.86 times less return on investment than WA1 Resources. But when comparing it to its historical volatility, Bluescope Steel is 1.28 times less risky than WA1 Resources. It trades about 0.06 of its potential returns per unit of risk. WA1 Resources is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 1,475 in WA1 Resources on August 29, 2024 and sell it today you would earn a total of 130.00 from holding WA1 Resources or generate 8.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bluescope Steel vs. WA1 Resources
Performance |
| Timeline |
| Bluescope Steel |
| WA1 Resources |
Bluescope Steel and WA1 Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bluescope Steel and WA1 Resources
The main advantage of trading using opposite Bluescope Steel and WA1 Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bluescope Steel position performs unexpectedly, WA1 Resources 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 WA1 Resources will offset losses from the drop in WA1 Resources' 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 |
| WA1 Resources vs. Westpac Banking | WA1 Resources vs. Prime Financial Group | WA1 Resources vs. Bank of Queensland | WA1 Resources vs. Auswide Bank |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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