Correlation Between Bluescope Steel and Itech Minerals

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

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

Diversification Opportunities for Bluescope Steel and Itech Minerals

0.57

Correlation Coefficient

Bluescope Steel  Itech Minerals

Very weak diversification

The 3 months correlation between Bluescope and Itech is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Bluescope Steel and Itech Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Itech Minerals 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 Itech Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Itech Minerals has no effect on the direction of Bluescope Steel i.e., Bluescope Steel and Itech Minerals go up and down completely randomly.

Pair Corralation between Bluescope Steel and Itech Minerals

Assuming the 90 days trading horizon Bluescope Steel is expected to under-perform the Itech Minerals. But the stock apears to be less risky and, when comparing its historical volatility, Bluescope Steel is 1.54 times less risky than Itech Minerals. The stock trades about -0.41 of its potential returns per unit of risk. The Itech Minerals is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  5.60  in Itech Minerals on October 8, 2024 and sell it today you would lose (0.20) from holding Itech Minerals or give up 3.57% of portfolio value over 90 days.

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

Bluescope Steel  vs.  Itech Minerals

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 uncertain performance in the last few months, the Stock's essential indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Itech Minerals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Itech Minerals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's primary indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Bluescope Steel and Itech Minerals

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

The idea behind Bluescope Steel and Itech Minerals 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.