Correlation Between Essilor International and BlueScope Steel

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

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

Diversification Opportunities for Essilor International and BlueScope Steel

-0.87

Correlation Coefficient

Essilor International  BlueScope Steel

Pay attention - limited upside

The 3 months correlation between Essilor and BlueScope is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Essilor International SA and BlueScope Steel Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlueScope Steel and Essilor International 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 Essilor International SA 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 Essilor International i.e., Essilor International and BlueScope Steel go up and down completely randomly.

Pair Corralation between Essilor International and BlueScope Steel

Assuming the 90 days horizon Essilor International SA is expected to generate 0.81 times more return on investment than BlueScope Steel. However, Essilor International SA is 1.24 times less risky than BlueScope Steel. It trades about 0.21 of its potential returns per unit of risk. BlueScope Steel Limited is currently generating about -0.19 per unit of risk. If you would invest  12,059  in Essilor International SA on December 23, 2024 and sell it today you would earn a total of  2,335  from holding Essilor International SA or generate 19.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	67.21%
Values	Daily Returns

Essilor International SA  vs.  BlueScope Steel Limited

Essilor International

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Essilor International SA are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Essilor International showed solid returns over the last few months and may actually be approaching a breakup point.

BlueScope Steel

Risk-Adjusted Performance

Very Weak

Over the last 90 days BlueScope Steel Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Essilor International and BlueScope Steel

The main advantage of trading using opposite Essilor International and BlueScope Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Essilor International 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 Essilor International SA and BlueScope Steel Limited 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.