Correlation Between BLUESCOPE STEEL and TOREX SEMICONDUCTOR

Can any of the company-specific risk be diversified away by investing in both BLUESCOPE STEEL and TOREX SEMICONDUCTOR 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 TOREX SEMICONDUCTOR into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BLUESCOPE STEEL and TOREX SEMICONDUCTOR LTD, you can compare the effects of market volatilities on BLUESCOPE STEEL and TOREX SEMICONDUCTOR 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 TOREX SEMICONDUCTOR. Check out your portfolio center. Please also check ongoing floating volatility patterns of BLUESCOPE STEEL and TOREX SEMICONDUCTOR.

Diversification Opportunities for BLUESCOPE STEEL and TOREX SEMICONDUCTOR

0.4

Correlation Coefficient

BLUESCOPE STEEL  TOREX SEMICONDUCTOR

Very weak diversification

The 3 months correlation between BLUESCOPE and TOREX is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding BLUESCOPE STEEL and TOREX SEMICONDUCTOR LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TOREX SEMICONDUCTOR LTD 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 are associated (or correlated) with TOREX SEMICONDUCTOR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TOREX SEMICONDUCTOR LTD has no effect on the direction of BLUESCOPE STEEL i.e., BLUESCOPE STEEL and TOREX SEMICONDUCTOR go up and down completely randomly.

Pair Corralation between BLUESCOPE STEEL and TOREX SEMICONDUCTOR

Assuming the 90 days trading horizon BLUESCOPE STEEL is expected to generate 0.79 times more return on investment than TOREX SEMICONDUCTOR. However, BLUESCOPE STEEL is 1.27 times less risky than TOREX SEMICONDUCTOR. It trades about 0.02 of its potential returns per unit of risk. TOREX SEMICONDUCTOR LTD is currently generating about -0.06 per unit of risk. If you would invest  973.00  in BLUESCOPE STEEL on September 20, 2024 and sell it today you would earn a total of  147.00  from holding BLUESCOPE STEEL or generate 15.11% return on investment over 90 days.

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

BLUESCOPE STEEL  vs.  TOREX SEMICONDUCTOR LTD

BLUESCOPE STEEL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BLUESCOPE STEEL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, BLUESCOPE STEEL is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

TOREX SEMICONDUCTOR LTD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TOREX SEMICONDUCTOR LTD 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 January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with BLUESCOPE STEEL and TOREX SEMICONDUCTOR

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

The idea behind BLUESCOPE STEEL and TOREX SEMICONDUCTOR LTD 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.