Correlation Between Cummins and BlueScope Steel
Can any of the company-specific risk be diversified away by investing in both Cummins 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 Cummins and BlueScope Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cummins and BlueScope Steel Limited, you can compare the effects of market volatilities on Cummins 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 Cummins with a short position of BlueScope Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cummins and BlueScope Steel.
Diversification Opportunities for Cummins and BlueScope Steel
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Cummins and BlueScope is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Cummins and BlueScope Steel Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlueScope Steel and Cummins 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 Cummins 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 Cummins i.e., Cummins and BlueScope Steel go up and down completely randomly.
Pair Corralation between Cummins and BlueScope Steel
Assuming the 90 days horizon Cummins is expected to generate 0.5 times more return on investment than BlueScope Steel. However, Cummins is 2.01 times less risky than BlueScope Steel. It trades about 0.16 of its potential returns per unit of risk. BlueScope Steel Limited is currently generating about 0.01 per unit of risk. If you would invest 34,475 in Cummins on September 14, 2024 and sell it today you would earn a total of 1,335 from holding Cummins or generate 3.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cummins vs. BlueScope Steel Limited
Performance |
| Timeline |
| Cummins |
| BlueScope Steel |
Cummins and BlueScope Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cummins and BlueScope Steel
The main advantage of trading using opposite Cummins and BlueScope Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cummins 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.| Cummins vs. BlueScope Steel Limited | Cummins vs. GLG LIFE TECH | Cummins vs. Playtech plc | Cummins vs. SOFI TECHNOLOGIES |
| BlueScope Steel vs. ArcelorMittal | BlueScope Steel vs. NIPPON STEEL SPADR | BlueScope Steel vs. Reliance Steel Aluminum | BlueScope Steel vs. Superior Plus Corp |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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