Correlation Between Penn National and BlueScope Steel
Can any of the company-specific risk be diversified away by investing in both Penn National 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 Penn National and BlueScope Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Penn National Gaming and BlueScope Steel Limited, you can compare the effects of market volatilities on Penn National 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 Penn National with a short position of BlueScope Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Penn National and BlueScope Steel.
Diversification Opportunities for Penn National and BlueScope Steel
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Penn and BlueScope is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Penn National Gaming and BlueScope Steel Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlueScope Steel and Penn National 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 Penn National Gaming 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 Penn National i.e., Penn National and BlueScope Steel go up and down completely randomly.
Pair Corralation between Penn National and BlueScope Steel
Assuming the 90 days horizon Penn National is expected to generate 1.27 times less return on investment than BlueScope Steel. In addition to that, Penn National is 1.52 times more volatile than BlueScope Steel Limited. It trades about 0.15 of its total potential returns per unit of risk. BlueScope Steel Limited is currently generating about 0.29 per unit of volatility. If you would invest 1,140 in BlueScope Steel Limited on November 5, 2024 and sell it today you would earn a total of 120.00 from holding BlueScope Steel Limited or generate 10.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Penn National Gaming vs. BlueScope Steel Limited
Performance |
| Timeline |
| Penn National Gaming |
| BlueScope Steel |
Penn National and BlueScope Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Penn National and BlueScope Steel
The main advantage of trading using opposite Penn National and BlueScope Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Penn National 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.| Penn National vs. Titan Machinery | Penn National vs. AGRICULTBK HADR25 YC | Penn National vs. SYSTEMAIR AB | Penn National vs. Dairy Farm International |
| BlueScope Steel vs. WisdomTree Investments | BlueScope Steel vs. MGIC INVESTMENT | BlueScope Steel vs. PennantPark Investment | BlueScope Steel vs. Casio Computer CoLtd |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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