Correlation Between Bluescope Steel and Corella Resources

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

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

Diversification Opportunities for Bluescope Steel and Corella Resources

-0.65

Correlation Coefficient

Bluescope Steel  Corella Resources

Excellent diversification

The 3 months correlation between Bluescope and Corella is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Bluescope Steel and Corella Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Corella Resources 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 Corella Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Corella Resources has no effect on the direction of Bluescope Steel i.e., Bluescope Steel and Corella Resources go up and down completely randomly.

Pair Corralation between Bluescope Steel and Corella Resources

Assuming the 90 days trading horizon Bluescope Steel is expected to generate 4.3 times less return on investment than Corella Resources. But when comparing it to its historical volatility, Bluescope Steel is 9.49 times less risky than Corella Resources. It trades about 0.13 of its potential returns per unit of risk. Corella Resources is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  0.30  in Corella Resources on December 24, 2024 and sell it today you would lose (0.10) from holding Corella Resources or give up 33.33% of portfolio value over 90 days.

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

Bluescope Steel  vs.  Corella Resources

Bluescope Steel

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bluescope Steel are ranked lower than 10 (%) 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.

Corella Resources

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Corella Resources are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Corella Resources unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bluescope Steel and Corella Resources

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

The idea behind Bluescope Steel and Corella Resources 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.