Correlation Between GIBB River and Bluescope Steel

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

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

Diversification Opportunities for GIBB River and Bluescope Steel

-0.42

Correlation Coefficient

GIBB River  Bluescope Steel

Very good diversification

The 3 months correlation between GIBB and Bluescope is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding GIBB River Diamonds and Bluescope Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bluescope Steel and GIBB River 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 GIBB River Diamonds 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 GIBB River i.e., GIBB River and Bluescope Steel go up and down completely randomly.

Pair Corralation between GIBB River and Bluescope Steel

Assuming the 90 days trading horizon GIBB River Diamonds is expected to generate 4.18 times more return on investment than Bluescope Steel. However, GIBB River is 4.18 times more volatile than Bluescope Steel. It trades about 0.05 of its potential returns per unit of risk. Bluescope Steel is currently generating about -0.02 per unit of risk. If you would invest  3.30  in GIBB River Diamonds on October 24, 2024 and sell it today you would earn a total of  0.80  from holding GIBB River Diamonds or generate 24.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.6%
Values	Daily Returns

GIBB River Diamonds  vs.  Bluescope Steel

GIBB River Diamonds

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in GIBB River Diamonds are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental drivers, GIBB River may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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 GIBB River and Bluescope Steel

The main advantage of trading using opposite GIBB River and Bluescope Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GIBB River 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 GIBB River Diamonds 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.