Correlation Between Everest Metals and Bluescope Steel
Can any of the company-specific risk be diversified away by investing in both Everest Metals 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 Everest Metals and Bluescope Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Everest Metals and Bluescope Steel, you can compare the effects of market volatilities on Everest Metals 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 Everest Metals with a short position of Bluescope Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Everest Metals and Bluescope Steel.
Diversification Opportunities for Everest Metals and Bluescope Steel
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Everest and Bluescope is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Everest Metals and Bluescope Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bluescope Steel and Everest Metals 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 Everest Metals 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 Everest Metals i.e., Everest Metals and Bluescope Steel go up and down completely randomly.
Pair Corralation between Everest Metals and Bluescope Steel
Assuming the 90 days trading horizon Everest Metals is expected to generate 3.74 times more return on investment than Bluescope Steel. However, Everest Metals is 3.74 times more volatile than Bluescope Steel. It trades about 0.04 of its potential returns per unit of risk. Bluescope Steel is currently generating about 0.02 per unit of risk. If you would invest 10.00 in Everest Metals on October 14, 2024 and sell it today you would earn a total of 4.00 from holding Everest Metals or generate 40.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Everest Metals vs. Bluescope Steel
Performance |
| Timeline |
| Everest Metals |
| Bluescope Steel |
Everest Metals and Bluescope Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Everest Metals and Bluescope Steel
The main advantage of trading using opposite Everest Metals and Bluescope Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Everest Metals 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.| Everest Metals vs. Northern Star Resources | Everest Metals vs. Evolution Mining | Everest Metals vs. Bluescope Steel | Everest Metals vs. De Grey Mining |
| Bluescope Steel vs. Torque Metals | Bluescope Steel vs. Westpac Banking | Bluescope Steel vs. Everest Metals | Bluescope Steel vs. Retail Food Group |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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