Correlation Between Champion Iron and BlueScope Steel
Can any of the company-specific risk be diversified away by investing in both Champion Iron and BlueScope Steel 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 Champion Iron and BlueScope Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Champion Iron Limited and BlueScope Steel Ltd, you can compare the effects of market volatilities on Champion Iron and BlueScope Steel 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 Champion Iron with a short position of BlueScope Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Champion Iron and BlueScope Steel.
Diversification Opportunities for Champion Iron and BlueScope Steel
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Champion and BlueScope is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Champion Iron Limited and BlueScope Steel Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlueScope Steel and Champion Iron 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 Champion Iron Limited are associated (or correlated) with BlueScope Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BlueScope Steel has no effect on the direction of Champion Iron i.e., Champion Iron and BlueScope Steel go up and down completely randomly.
Pair Corralation between Champion Iron and BlueScope Steel
Assuming the 90 days horizon Champion Iron Limited is expected to under-perform the BlueScope Steel. In addition to that, Champion Iron is 1.2 times more volatile than BlueScope Steel Ltd. It trades about 0.0 of its total potential returns per unit of risk. BlueScope Steel Ltd is currently generating about 0.03 per unit of volatility. If you would invest 5,707 in BlueScope Steel Ltd on August 28, 2024 and sell it today you would earn a total of 1,172 from holding BlueScope Steel Ltd or generate 20.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.11% |
| Values | Daily Returns |
Champion Iron Limited vs. BlueScope Steel Ltd
Performance |
| Timeline |
| Champion Iron Limited |
| BlueScope Steel |
Champion Iron and BlueScope Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Champion Iron and BlueScope Steel
The main advantage of trading using opposite Champion Iron and BlueScope Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Champion Iron position performs unexpectedly, BlueScope Steel 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 BlueScope Steel will offset losses from the drop in BlueScope Steel's long position.| Champion Iron vs. Olympic Steel | Champion Iron vs. Mesabi Trust | Champion Iron vs. Universal Stainless Alloy | Champion Iron vs. POSCO Holdings |
| BlueScope Steel vs. Olympic Steel | BlueScope Steel vs. Mesabi Trust | BlueScope Steel vs. Universal Stainless Alloy | BlueScope Steel vs. POSCO Holdings |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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