Correlation Between BlueScope Steel and Platinum Investment

Can any of the company-specific risk be diversified away by investing in both BlueScope Steel and Platinum Investment 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 Platinum Investment 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 Platinum Investment Management, you can compare the effects of market volatilities on BlueScope Steel and Platinum Investment 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 Platinum Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of BlueScope Steel and Platinum Investment.

Diversification Opportunities for BlueScope Steel and Platinum Investment

0.3

Correlation Coefficient

BlueScope Steel  Platinum Investment

Weak diversification

The 3 months correlation between BlueScope and Platinum is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding BlueScope Steel Limited and Platinum Investment Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Platinum Investment 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 Platinum Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Platinum Investment has no effect on the direction of BlueScope Steel i.e., BlueScope Steel and Platinum Investment go up and down completely randomly.

Pair Corralation between BlueScope Steel and Platinum Investment

Assuming the 90 days horizon BlueScope Steel Limited is expected to generate 0.66 times more return on investment than Platinum Investment. However, BlueScope Steel Limited is 1.52 times less risky than Platinum Investment. It trades about 0.02 of its potential returns per unit of risk. Platinum Investment Management is currently generating about -0.01 per unit of risk. If you would invest  1,010  in BlueScope Steel Limited on September 26, 2024 and sell it today you would earn a total of  130.00  from holding BlueScope Steel Limited or generate 12.87% return on investment over 90 days.

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

BlueScope Steel Limited  vs.  Platinum Investment Management

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.

Platinum Investment

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with BlueScope Steel and Platinum Investment

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

The idea behind BlueScope Steel Limited and Platinum Investment Management 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.