Correlation Between BSP Financial and Vulcan Steel
Can any of the company-specific risk be diversified away by investing in both BSP Financial and Vulcan 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 BSP Financial and Vulcan Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BSP Financial Group and Vulcan Steel, you can compare the effects of market volatilities on BSP Financial and Vulcan 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 BSP Financial with a short position of Vulcan Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of BSP Financial and Vulcan Steel.
Diversification Opportunities for BSP Financial and Vulcan Steel
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between BSP and Vulcan is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding BSP Financial Group and Vulcan Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vulcan Steel and BSP Financial 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 BSP Financial Group are associated (or correlated) with Vulcan Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vulcan Steel has no effect on the direction of BSP Financial i.e., BSP Financial and Vulcan Steel go up and down completely randomly.
Pair Corralation between BSP Financial and Vulcan Steel
Assuming the 90 days trading horizon BSP Financial is expected to generate 6.06 times less return on investment than Vulcan Steel. But when comparing it to its historical volatility, BSP Financial Group is 1.41 times less risky than Vulcan Steel. It trades about 0.03 of its potential returns per unit of risk. Vulcan Steel is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 702.00 in Vulcan Steel on September 26, 2024 and sell it today you would earn a total of 61.00 from holding Vulcan Steel or generate 8.69% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
BSP Financial Group vs. Vulcan Steel
Performance |
Timeline |
BSP Financial Group |
Vulcan Steel |
BSP Financial and Vulcan Steel Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with BSP Financial and Vulcan Steel
The main advantage of trading using opposite BSP Financial and Vulcan Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BSP Financial position performs unexpectedly, Vulcan 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 Vulcan Steel will offset losses from the drop in Vulcan Steel's long position.BSP Financial vs. Westpac Banking | BSP Financial vs. Ecofibre | BSP Financial vs. iShares Global Healthcare | BSP Financial vs. Australian Dairy Farms |
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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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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