Correlation Between Bluescope Steel and MFF Capital

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

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

Diversification Opportunities for Bluescope Steel and MFF Capital

-0.54

Correlation Coefficient

Bluescope Steel  MFF Capital

Excellent diversification

The 3 months correlation between Bluescope and MFF is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Bluescope Steel and MFF Capital Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MFF Capital 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 MFF Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MFF Capital Investments has no effect on the direction of Bluescope Steel i.e., Bluescope Steel and MFF Capital go up and down completely randomly.

Pair Corralation between Bluescope Steel and MFF Capital

Assuming the 90 days trading horizon Bluescope Steel is expected to generate 1.84 times more return on investment than MFF Capital. However, Bluescope Steel is 1.84 times more volatile than MFF Capital Investments. It trades about 0.15 of its potential returns per unit of risk. MFF Capital Investments is currently generating about -0.08 per unit of risk. If you would invest  1,920  in Bluescope Steel on December 21, 2024 and sell it today you would earn a total of  374.00  from holding Bluescope Steel or generate 19.48% return on investment over 90 days.

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

Bluescope Steel  vs.  MFF Capital 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.

MFF Capital Investments

Risk-Adjusted Performance

Very Weak

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

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

The idea behind Bluescope Steel and MFF Capital 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.