Correlation Between BLUESCOPE STEEL and Virtus Investment

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

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

Diversification Opportunities for BLUESCOPE STEEL and Virtus Investment

-0.56

Correlation Coefficient

BLUESCOPE STEEL  Virtus Investment

Excellent diversification

The 3 months correlation between BLUESCOPE and Virtus is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding BLUESCOPE STEEL and Virtus Investment Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virtus 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 are associated (or correlated) with Virtus Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virtus Investment has no effect on the direction of BLUESCOPE STEEL i.e., BLUESCOPE STEEL and Virtus Investment go up and down completely randomly.

Pair Corralation between BLUESCOPE STEEL and Virtus Investment

Assuming the 90 days trading horizon BLUESCOPE STEEL is expected to generate 1.07 times more return on investment than Virtus Investment. However, BLUESCOPE STEEL is 1.07 times more volatile than Virtus Investment Partners. It trades about 0.11 of its potential returns per unit of risk. Virtus Investment Partners is currently generating about -0.19 per unit of risk. If you would invest  1,116  in BLUESCOPE STEEL on December 24, 2024 and sell it today you would earn a total of  164.00  from holding BLUESCOPE STEEL or generate 14.7% return on investment over 90 days.

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

BLUESCOPE STEEL  vs.  Virtus Investment Partners

BLUESCOPE STEEL

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BLUESCOPE STEEL are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, BLUESCOPE STEEL unveiled solid returns over the last few months and may actually be approaching a breakup point.

Virtus Investment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Virtus Investment Partners has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with BLUESCOPE STEEL and Virtus Investment

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

The idea behind BLUESCOPE STEEL and Virtus Investment Partners 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.