Correlation Between BlueScope Steel and Boyd Gaming

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

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

Diversification Opportunities for BlueScope Steel and Boyd Gaming

-0.24

Correlation Coefficient

BlueScope Steel  Boyd Gaming

Very good diversification

The 3 months correlation between BlueScope and Boyd is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding BlueScope Steel Limited and Boyd Gaming in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boyd Gaming and BlueScope Steel 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 BlueScope Steel Limited are associated (or correlated) with Boyd Gaming. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boyd Gaming has no effect on the direction of BlueScope Steel i.e., BlueScope Steel and Boyd Gaming go up and down completely randomly.

Pair Corralation between BlueScope Steel and Boyd Gaming

Assuming the 90 days horizon BlueScope Steel Limited is expected to under-perform the Boyd Gaming. In addition to that, BlueScope Steel is 1.86 times more volatile than Boyd Gaming. It trades about -0.26 of its total potential returns per unit of risk. Boyd Gaming is currently generating about -0.09 per unit of volatility. If you would invest  6,883  in Boyd Gaming on September 26, 2024 and sell it today you would lose (183.00) from holding Boyd Gaming or give up 2.66% of portfolio value over 90 days.

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

BlueScope Steel Limited  vs.  Boyd Gaming

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 fragile 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.

Boyd Gaming

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Boyd Gaming are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Boyd Gaming unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BlueScope Steel and Boyd Gaming

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

The idea behind BlueScope Steel Limited and Boyd Gaming 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.