Correlation Between Bluescope Steel and Cosmo Metals

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

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

Diversification Opportunities for Bluescope Steel and Cosmo Metals

-0.11

Correlation Coefficient

Bluescope Steel  Cosmo Metals

Good diversification

The 3 months correlation between Bluescope and Cosmo is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Bluescope Steel and Cosmo Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cosmo Metals 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 Cosmo Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cosmo Metals has no effect on the direction of Bluescope Steel i.e., Bluescope Steel and Cosmo Metals go up and down completely randomly.

Pair Corralation between Bluescope Steel and Cosmo Metals

Assuming the 90 days trading horizon Bluescope Steel is expected to generate 0.25 times more return on investment than Cosmo Metals. However, Bluescope Steel is 4.04 times less risky than Cosmo Metals. It trades about 0.13 of its potential returns per unit of risk. Cosmo Metals is currently generating about 0.01 per unit of risk. If you would invest  1,920  in Bluescope Steel on December 23, 2024 and sell it today you would earn a total of  316.00  from holding Bluescope Steel or generate 16.46% return on investment over 90 days.

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

Bluescope Steel  vs.  Cosmo Metals

Bluescope Steel

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bluescope Steel are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain essential indicators, Bluescope Steel unveiled solid returns over the last few months and may actually be approaching a breakup point.

Cosmo Metals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cosmo Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Cosmo Metals is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Bluescope Steel and Cosmo Metals

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

The idea behind Bluescope Steel and Cosmo Metals 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.