Correlation Between BlueScope Steel and Synalloy

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

By analyzing existing cross correlation between BlueScope Steel Ltd and Synalloy, you can compare the effects of market volatilities on BlueScope Steel and Synalloy 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 Synalloy. Check out your portfolio center. Please also check ongoing floating volatility patterns of BlueScope Steel and Synalloy.

Diversification Opportunities for BlueScope Steel and Synalloy

-0.61

Correlation Coefficient

BlueScope Steel  Synalloy

Excellent diversification

The 3 months correlation between BlueScope and Synalloy is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding BlueScope Steel Ltd and Synalloy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Synalloy 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 Ltd are associated (or correlated) with Synalloy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Synalloy has no effect on the direction of BlueScope Steel i.e., BlueScope Steel and Synalloy go up and down completely randomly.

Pair Corralation between BlueScope Steel and Synalloy

Assuming the 90 days horizon BlueScope Steel is expected to generate 2.28 times less return on investment than Synalloy. In addition to that, BlueScope Steel is 1.11 times more volatile than Synalloy. It trades about 0.01 of its total potential returns per unit of risk. Synalloy is currently generating about 0.02 per unit of volatility. If you would invest  1,060  in Synalloy on October 15, 2024 and sell it today you would earn a total of  65.00  from holding Synalloy or generate 6.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	97.98%
Values	Daily Returns

BlueScope Steel Ltd  vs.  Synalloy

BlueScope Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BlueScope Steel Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Synalloy

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Synalloy are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Synalloy unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BlueScope Steel and Synalloy

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

The idea behind BlueScope Steel Ltd and Synalloy 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.