Correlation Between Bluescope Steel and TPG Telecom

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

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

Diversification Opportunities for Bluescope Steel and TPG Telecom

0.45

Correlation Coefficient

Bluescope Steel  TPG Telecom

Very weak diversification

The 3 months correlation between Bluescope and TPG is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Bluescope Steel and TPG Telecom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TPG Telecom 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 TPG Telecom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TPG Telecom has no effect on the direction of Bluescope Steel i.e., Bluescope Steel and TPG Telecom go up and down completely randomly.

Pair Corralation between Bluescope Steel and TPG Telecom

Assuming the 90 days trading horizon Bluescope Steel is expected to under-perform the TPG Telecom. In addition to that, Bluescope Steel is 1.59 times more volatile than TPG Telecom. It trades about -0.57 of its total potential returns per unit of risk. TPG Telecom is currently generating about -0.06 per unit of volatility. If you would invest  454.00  in TPG Telecom on October 3, 2024 and sell it today you would lose (5.00) from holding TPG Telecom or give up 1.1% 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.  TPG Telecom

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.

TPG Telecom

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TPG Telecom has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Bluescope Steel and TPG Telecom

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

The idea behind Bluescope Steel and TPG Telecom 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.