Correlation Between Metro Mining and Bluescope Steel
Can any of the company-specific risk be diversified away by investing in both Metro Mining 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 Metro Mining and Bluescope Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Metro Mining and Bluescope Steel, you can compare the effects of market volatilities on Metro Mining 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 Metro Mining with a short position of Bluescope Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metro Mining and Bluescope Steel.
Diversification Opportunities for Metro Mining and Bluescope Steel
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between Metro and Bluescope is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Metro Mining and Bluescope Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bluescope Steel and Metro Mining 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 Metro Mining 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 Metro Mining i.e., Metro Mining and Bluescope Steel go up and down completely randomly.
Pair Corralation between Metro Mining and Bluescope Steel
Assuming the 90 days trading horizon Metro Mining is expected to generate 2.37 times more return on investment than Bluescope Steel. However, Metro Mining is 2.37 times more volatile than Bluescope Steel. It trades about 0.05 of its potential returns per unit of risk. Bluescope Steel is currently generating about 0.01 per unit of risk. If you would invest 4.50 in Metro Mining on October 17, 2024 and sell it today you would earn a total of 0.80 from holding Metro Mining or generate 17.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Metro Mining vs. Bluescope Steel
Performance |
| Timeline |
| Metro Mining |
| Bluescope Steel |
Metro Mining and Bluescope Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Metro Mining and Bluescope Steel
The main advantage of trading using opposite Metro Mining and Bluescope Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metro Mining 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.| Metro Mining vs. Hudson Investment Group | Metro Mining vs. Argo Investments | Metro Mining vs. Alternative Investment Trust | Metro Mining vs. Australian Unity Office |
| Bluescope Steel vs. Metro Mining | Bluescope Steel vs. Galena Mining | Bluescope Steel vs. Talisman Mining | Bluescope Steel vs. Hutchison Telecommunications |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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