Correlation Between Bisalloy Steel and Origin Energy

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Can any of the company-specific risk be diversified away by investing in both Bisalloy Steel and Origin Energy 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 Bisalloy Steel and Origin Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bisalloy Steel Group and Origin Energy, you can compare the effects of market volatilities on Bisalloy Steel and Origin Energy 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 Bisalloy Steel with a short position of Origin Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bisalloy Steel and Origin Energy.

Diversification Opportunities for Bisalloy Steel and Origin Energy

0.74
  Correlation Coefficient

Poor diversification

The 3 months correlation between Bisalloy and Origin is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Bisalloy Steel Group and Origin Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Origin Energy and Bisalloy 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 Bisalloy Steel Group are associated (or correlated) with Origin Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Origin Energy has no effect on the direction of Bisalloy Steel i.e., Bisalloy Steel and Origin Energy go up and down completely randomly.

Pair Corralation between Bisalloy Steel and Origin Energy

Assuming the 90 days trading horizon Bisalloy Steel Group is expected to generate 3.17 times more return on investment than Origin Energy. However, Bisalloy Steel is 3.17 times more volatile than Origin Energy. It trades about 0.04 of its potential returns per unit of risk. Origin Energy is currently generating about 0.02 per unit of risk. If you would invest  409.00  in Bisalloy Steel Group on September 30, 2024 and sell it today you would earn a total of  45.00  from holding Bisalloy Steel Group or generate 11.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Bisalloy Steel Group  vs.  Origin Energy

 Performance 
       Timeline  
Bisalloy Steel Group 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Bisalloy Steel Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Bisalloy Steel unveiled solid returns over the last few months and may actually be approaching a breakup point.
Origin Energy 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Origin Energy are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Origin Energy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Bisalloy Steel and Origin Energy Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Bisalloy Steel and Origin Energy

The main advantage of trading using opposite Bisalloy Steel and Origin Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bisalloy Steel position performs unexpectedly, Origin Energy 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 Origin Energy will offset losses from the drop in Origin Energy's long position.
The idea behind Bisalloy Steel Group and Origin Energy 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.

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