Correlation Between Superior Plus and BlueScope Steel

Can any of the company-specific risk be diversified away by investing in both Superior Plus 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 Superior Plus and BlueScope Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Superior Plus Corp and BlueScope Steel Limited, you can compare the effects of market volatilities on Superior Plus 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 Superior Plus with a short position of BlueScope Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Superior Plus and BlueScope Steel.

Diversification Opportunities for Superior Plus and BlueScope Steel

0.41

Correlation Coefficient

Superior Plus  BlueScope Steel

Very weak diversification

The 3 months correlation between Superior and BlueScope is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Superior Plus Corp and BlueScope Steel Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlueScope Steel and Superior Plus 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 Superior Plus Corp 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 Superior Plus i.e., Superior Plus and BlueScope Steel go up and down completely randomly.

Pair Corralation between Superior Plus and BlueScope Steel

Assuming the 90 days horizon Superior Plus Corp is expected to under-perform the BlueScope Steel. In addition to that, Superior Plus is 1.41 times more volatile than BlueScope Steel Limited. It trades about -0.06 of its total potential returns per unit of risk. BlueScope Steel Limited is currently generating about -0.07 per unit of volatility. If you would invest  1,350  in BlueScope Steel Limited on October 20, 2024 and sell it today you would lose (160.00) from holding BlueScope Steel Limited or give up 11.85% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Superior Plus Corp  vs.  BlueScope Steel Limited

Superior Plus Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Superior Plus Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

BlueScope Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BlueScope Steel Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Superior Plus and BlueScope Steel

The main advantage of trading using opposite Superior Plus and BlueScope Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Superior Plus 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.

The idea behind Superior Plus Corp and BlueScope Steel Limited pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Global Correlations module to find global opportunities by holding instruments from different markets.