Correlation Between Bluescope Steel and Wam Leaders
Can any of the company-specific risk be diversified away by investing in both Bluescope Steel and Wam Leaders 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 Wam Leaders into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bluescope Steel and Wam Leaders, you can compare the effects of market volatilities on Bluescope Steel and Wam Leaders 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 Wam Leaders. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bluescope Steel and Wam Leaders.
Diversification Opportunities for Bluescope Steel and Wam Leaders
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between Bluescope and Wam is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Bluescope Steel and Wam Leaders in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wam Leaders 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 Wam Leaders. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wam Leaders has no effect on the direction of Bluescope Steel i.e., Bluescope Steel and Wam Leaders go up and down completely randomly.
Pair Corralation between Bluescope Steel and Wam Leaders
Assuming the 90 days trading horizon Bluescope Steel is expected to generate 1.79 times more return on investment than Wam Leaders. However, Bluescope Steel is 1.79 times more volatile than Wam Leaders. It trades about 0.02 of its potential returns per unit of risk. Wam Leaders is currently generating about -0.02 per unit of risk. If you would invest 1,882 in Bluescope Steel on November 8, 2024 and sell it today you would earn a total of 211.00 from holding Bluescope Steel or generate 11.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bluescope Steel vs. Wam Leaders
Performance |
| Timeline |
| Bluescope Steel |
| Wam Leaders |
Bluescope Steel and Wam Leaders Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bluescope Steel and Wam Leaders
The main advantage of trading using opposite Bluescope Steel and Wam Leaders positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bluescope Steel position performs unexpectedly, Wam Leaders 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 Wam Leaders will offset losses from the drop in Wam Leaders' long position.| Bluescope Steel vs. G8 Education | Bluescope Steel vs. Mach7 Technologies | Bluescope Steel vs. AiMedia Technologies | Bluescope Steel vs. Kip McGrath Education |
| Wam Leaders vs. MFF Capital Investments | Wam Leaders vs. Carnegie Clean Energy | Wam Leaders vs. Qbe Insurance Group | Wam Leaders vs. Steamships Trading |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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