Correlation Between Bluescope Steel and Microequities Asset

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

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

Diversification Opportunities for Bluescope Steel and Microequities Asset

0.24

Correlation Coefficient

Bluescope Steel  Microequities Asset

Modest diversification

The 3 months correlation between Bluescope and Microequities is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Bluescope Steel and Microequities Asset Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microequities Asset 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 Microequities Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microequities Asset has no effect on the direction of Bluescope Steel i.e., Bluescope Steel and Microequities Asset go up and down completely randomly.

Pair Corralation between Bluescope Steel and Microequities Asset

Assuming the 90 days trading horizon Bluescope Steel is expected to under-perform the Microequities Asset. In addition to that, Bluescope Steel is 1.61 times more volatile than Microequities Asset Management. It trades about -0.44 of its total potential returns per unit of risk. Microequities Asset Management is currently generating about -0.1 per unit of volatility. If you would invest  53.00  in Microequities Asset Management on October 6, 2024 and sell it today you would lose (1.00) from holding Microequities Asset Management or give up 1.89% of portfolio value over 90 days.

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

Bluescope Steel  vs.  Microequities Asset Management

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.

Microequities Asset

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Bluescope Steel and Microequities Asset Management 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.

Check out your portfolio center.

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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.