Correlation Between G8 Education and Bluescope Steel

Can any of the company-specific risk be diversified away by investing in both G8 Education 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 G8 Education and Bluescope Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between G8 Education and Bluescope Steel, you can compare the effects of market volatilities on G8 Education 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 G8 Education with a short position of Bluescope Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of G8 Education and Bluescope Steel.

Diversification Opportunities for G8 Education and Bluescope Steel

0.44

Correlation Coefficient

G8 Education  Bluescope Steel

Very weak diversification

The 3 months correlation between GEM and Bluescope is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding G8 Education and Bluescope Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bluescope Steel and G8 Education 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 G8 Education 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 G8 Education i.e., G8 Education and Bluescope Steel go up and down completely randomly.

Pair Corralation between G8 Education and Bluescope Steel

Assuming the 90 days trading horizon G8 Education is expected to generate 12.17 times less return on investment than Bluescope Steel. But when comparing it to its historical volatility, G8 Education is 1.34 times less risky than Bluescope Steel. It trades about 0.02 of its potential returns per unit of risk. Bluescope Steel is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,877  in Bluescope Steel on December 30, 2024 and sell it today you would earn a total of  354.00  from holding Bluescope Steel or generate 18.86% return on investment over 90 days.

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

G8 Education  vs.  Bluescope Steel

G8 Education

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in G8 Education are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable primary indicators, G8 Education 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

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bluescope Steel are ranked lower than 10 (%) 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.

Pair Trading with G8 Education and Bluescope Steel

The main advantage of trading using opposite G8 Education and Bluescope Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if G8 Education 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 G8 Education 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.