Correlation Between Boiron SA and BlueScope Steel

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

By analyzing existing cross correlation between Boiron SA and BlueScope Steel Limited, you can compare the effects of market volatilities on Boiron SA and BlueScope Steel 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 Boiron SA with a short position of BlueScope Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boiron SA and BlueScope Steel.

Diversification Opportunities for Boiron SA and BlueScope Steel

-0.28

Correlation Coefficient

Boiron SA  BlueScope Steel

Very good diversification

The 3 months correlation between Boiron and BlueScope is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Boiron SA and BlueScope Steel Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlueScope Steel and Boiron SA 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 Boiron SA are associated (or correlated) with BlueScope Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BlueScope Steel has no effect on the direction of Boiron SA i.e., Boiron SA and BlueScope Steel go up and down completely randomly.

Pair Corralation between Boiron SA and BlueScope Steel

Assuming the 90 days horizon Boiron SA is expected to under-perform the BlueScope Steel. But the stock apears to be less risky and, when comparing its historical volatility, Boiron SA is 1.28 times less risky than BlueScope Steel. The stock trades about -0.12 of its potential returns per unit of risk. The BlueScope Steel Limited is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,209  in BlueScope Steel Limited on September 3, 2024 and sell it today you would earn a total of  151.00  from holding BlueScope Steel Limited or generate 12.49% return on investment over 90 days.

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

Boiron SA  vs.  BlueScope Steel Limited

Boiron SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Boiron SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady 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.

BlueScope Steel

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BlueScope Steel Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, BlueScope Steel reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Boiron SA and BlueScope Steel

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

The idea behind Boiron SA and BlueScope Steel Limited 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.