Correlation Between Bluescope Steel and Polarx

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

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

Diversification Opportunities for Bluescope Steel and Polarx

0.22

Correlation Coefficient

Bluescope Steel  Polarx

Modest diversification

The 3 months correlation between Bluescope and Polarx is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Bluescope Steel and Polarx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Polarx 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 Polarx. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Polarx has no effect on the direction of Bluescope Steel i.e., Bluescope Steel and Polarx go up and down completely randomly.

Pair Corralation between Bluescope Steel and Polarx

Assuming the 90 days trading horizon Bluescope Steel is expected to generate 2.56 times less return on investment than Polarx. But when comparing it to its historical volatility, Bluescope Steel is 5.15 times less risky than Polarx. It trades about 0.04 of its potential returns per unit of risk. Polarx is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  2.00  in Polarx on September 20, 2024 and sell it today you would lose (1.30) from holding Polarx or give up 65.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Bluescope Steel  vs.  Polarx

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 comparatively stable essential indicators, Bluescope Steel is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Polarx

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Bluescope Steel and Polarx 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.