Correlation Between Energy Technologies and Bluescope Steel

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

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

Diversification Opportunities for Energy Technologies and Bluescope Steel

0.3

Correlation Coefficient

Energy Technologies  Bluescope Steel

Weak diversification

The 3 months correlation between Energy and Bluescope is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Energy Technologies Limited and Bluescope Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bluescope Steel and Energy Technologies 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 Energy Technologies Limited are associated (or correlated) with Bluescope Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bluescope Steel has no effect on the direction of Energy Technologies i.e., Energy Technologies and Bluescope Steel go up and down completely randomly.

Pair Corralation between Energy Technologies and Bluescope Steel

Assuming the 90 days trading horizon Energy Technologies Limited is expected to under-perform the Bluescope Steel. In addition to that, Energy Technologies is 1.29 times more volatile than Bluescope Steel. It trades about -0.01 of its total potential returns per unit of risk. Bluescope Steel is currently generating about 0.0 per unit of volatility. If you would invest  2,016  in Bluescope Steel on September 18, 2024 and sell it today you would lose (16.00) from holding Bluescope Steel or give up 0.79% of portfolio value over 90 days.

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

Energy Technologies Limited  vs.  Bluescope Steel

Energy Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Energy Technologies Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Energy Technologies is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Bluescope Steel

Risk-Adjusted Performance

0 of 100

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.

Pair Trading with Energy Technologies and Bluescope Steel

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

The idea behind Energy Technologies Limited and Bluescope Steel 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.