Correlation Between BlueScope Steel and PENN NATL

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

Diversification Opportunities for BlueScope Steel and PENN NATL

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Correlation Coefficient

BlueScope Steel  PENN NATL

Pay attention - limited upside

The 3 months correlation between BlueScope and PENN is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding BlueScope Steel Limited and PENN NATL GAMING in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PENN NATL 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 PENN NATL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PENN NATL GAMING has no effect on the direction of BlueScope Steel i.e., BlueScope Steel and PENN NATL go up and down completely randomly.

Pair Corralation between BlueScope Steel and PENN NATL

Assuming the 90 days horizon BlueScope Steel Limited is expected to under-perform the PENN NATL. But the stock apears to be less risky and, when comparing its historical volatility, BlueScope Steel Limited is 1.12 times less risky than PENN NATL. The stock trades about -0.12 of its potential returns per unit of risk. The PENN NATL GAMING is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,717  in PENN NATL GAMING on October 5, 2024 and sell it today you would earn a total of  179.00  from holding PENN NATL GAMING or generate 10.43% return on investment over 90 days.

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

BlueScope Steel Limited  vs.  PENN NATL GAMING

BlueScope Steel

Risk-Adjusted Performance

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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 fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

PENN NATL GAMING

Risk-Adjusted Performance

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Modest

Over the last 90 days PENN NATL GAMING has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather uncertain basic indicators, PENN NATL exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BlueScope Steel and PENN NATL

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

The idea behind BlueScope Steel Limited and PENN NATL 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.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.