Correlation Between Bluescope Steel and Djerriwarrh Investments

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

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

Diversification Opportunities for Bluescope Steel and Djerriwarrh Investments

-0.66

Correlation Coefficient

Bluescope Steel  Djerriwarrh Investments

Excellent diversification

The 3 months correlation between Bluescope and Djerriwarrh is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Bluescope Steel and Djerriwarrh Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Djerriwarrh Investments 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 Djerriwarrh Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Djerriwarrh Investments has no effect on the direction of Bluescope Steel i.e., Bluescope Steel and Djerriwarrh Investments go up and down completely randomly.

Pair Corralation between Bluescope Steel and Djerriwarrh Investments

Assuming the 90 days trading horizon Bluescope Steel is expected to generate 2.83 times more return on investment than Djerriwarrh Investments. However, Bluescope Steel is 2.83 times more volatile than Djerriwarrh Investments. It trades about 0.15 of its potential returns per unit of risk. Djerriwarrh Investments is currently generating about -0.05 per unit of risk. If you would invest  1,899  in Bluescope Steel on December 25, 2024 and sell it today you would earn a total of  375.00  from holding Bluescope Steel or generate 19.75% return on investment over 90 days.

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

Bluescope Steel  vs.  Djerriwarrh Investments

Bluescope Steel

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bluescope Steel are ranked lower than 11 (%) 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.

Djerriwarrh Investments

Risk-Adjusted Performance

Very Weak

Over the last 90 days Djerriwarrh Investments has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Djerriwarrh Investments 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 Djerriwarrh Investments

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

The idea behind Bluescope Steel and Djerriwarrh Investments 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.