Correlation Between Bluescope Steel and Aroa Biosurgery

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

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

Diversification Opportunities for Bluescope Steel and Aroa Biosurgery

-0.54

Correlation Coefficient

Bluescope Steel  Aroa Biosurgery

Excellent diversification

The 3 months correlation between Bluescope and Aroa is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Bluescope Steel and Aroa Biosurgery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aroa Biosurgery 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 Aroa Biosurgery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aroa Biosurgery has no effect on the direction of Bluescope Steel i.e., Bluescope Steel and Aroa Biosurgery go up and down completely randomly.

Pair Corralation between Bluescope Steel and Aroa Biosurgery

Assuming the 90 days trading horizon Bluescope Steel is expected to under-perform the Aroa Biosurgery. But the stock apears to be less risky and, when comparing its historical volatility, Bluescope Steel is 1.54 times less risky than Aroa Biosurgery. The stock trades about -0.03 of its potential returns per unit of risk. The Aroa Biosurgery is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  58.00  in Aroa Biosurgery on October 26, 2024 and sell it today you would earn a total of  20.00  from holding Aroa Biosurgery or generate 34.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Bluescope Steel  vs.  Aroa Biosurgery

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 essential 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.

Aroa Biosurgery

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aroa Biosurgery are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Aroa Biosurgery unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bluescope Steel and Aroa Biosurgery

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

The idea behind Bluescope Steel and Aroa Biosurgery 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.