Correlation Between BC IRON and United States

Can any of the company-specific risk be diversified away by investing in both BC IRON and United States 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 BC IRON and United States into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BC IRON and United States Steel, you can compare the effects of market volatilities on BC IRON and United States 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 BC IRON with a short position of United States. Check out your portfolio center. Please also check ongoing floating volatility patterns of BC IRON and United States.

Diversification Opportunities for BC IRON and United States

0.64

Correlation Coefficient

BC IRON  United States

Poor diversification

The 3 months correlation between BC3 and United is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding BC IRON and United States Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United States Steel and BC IRON 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 BC IRON are associated (or correlated) with United States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United States Steel has no effect on the direction of BC IRON i.e., BC IRON and United States go up and down completely randomly.

Pair Corralation between BC IRON and United States

Assuming the 90 days trading horizon BC IRON is expected to generate 2.49 times less return on investment than United States. But when comparing it to its historical volatility, BC IRON is 1.53 times less risky than United States. It trades about 0.15 of its potential returns per unit of risk. United States Steel is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  2,990  in United States Steel on October 27, 2024 and sell it today you would earn a total of  524.00  from holding United States Steel or generate 17.53% return on investment over 90 days.

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

BC IRON  vs.  United States Steel

BC IRON

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BC IRON has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

United States Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days United States Steel has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, United States is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with BC IRON and United States

The main advantage of trading using opposite BC IRON and United States positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BC IRON position performs unexpectedly, United States 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 United States will offset losses from the drop in United States' long position.

The idea behind BC IRON and United States Steel 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 CEOs Directory module to screen CEOs from public companies around the world.