Correlation Between BlueScope Steel and Sims Metal
Can any of the company-specific risk be diversified away by investing in both BlueScope Steel and Sims Metal 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 Sims Metal 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 Sims Metal Management, you can compare the effects of market volatilities on BlueScope Steel and Sims Metal 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 Sims Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of BlueScope Steel and Sims Metal.
Diversification Opportunities for BlueScope Steel and Sims Metal
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BlueScope and Sims is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding BlueScope Steel Limited and Sims Metal Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sims Metal Management 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 Sims Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sims Metal Management has no effect on the direction of BlueScope Steel i.e., BlueScope Steel and Sims Metal go up and down completely randomly.
Pair Corralation between BlueScope Steel and Sims Metal
Assuming the 90 days horizon BlueScope Steel Limited is expected to under-perform the Sims Metal. But the stock apears to be less risky and, when comparing its historical volatility, BlueScope Steel Limited is 1.03 times less risky than Sims Metal. The stock trades about -0.29 of its potential returns per unit of risk. The Sims Metal Management is currently generating about -0.15 of returns per unit of risk over similar time horizon. If you would invest 775.00 in Sims Metal Management on September 24, 2024 and sell it today you would lose (60.00) from holding Sims Metal Management or give up 7.74% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
BlueScope Steel Limited vs. Sims Metal Management
Performance |
Timeline |
BlueScope Steel |
Sims Metal Management |
BlueScope Steel and Sims Metal Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with BlueScope Steel and Sims Metal
The main advantage of trading using opposite BlueScope Steel and Sims Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BlueScope Steel position performs unexpectedly, Sims Metal 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 Sims Metal will offset losses from the drop in Sims Metal's long position.BlueScope Steel vs. Mitsubishi Gas Chemical | BlueScope Steel vs. TIANDE CHEMICAL | BlueScope Steel vs. Nissan Chemical Corp | BlueScope Steel vs. SHIN ETSU CHEMICAL |
Sims Metal vs. FARO Technologies | Sims Metal vs. Iridium Communications | Sims Metal vs. Charter Communications | Sims Metal vs. SOFI TECHNOLOGIES |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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