Correlation Between Gol Intelligent and BlueScope Steel

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

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

Diversification Opportunities for Gol Intelligent and BlueScope Steel

0.0

Correlation Coefficient

Gol Intelligent  BlueScope Steel

Pay attention - limited upside

The 3 months correlation between Gol and BlueScope is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Gol Intelligent Airlines and BlueScope Steel Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlueScope Steel and Gol Intelligent 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 Gol Intelligent Airlines 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 Gol Intelligent i.e., Gol Intelligent and BlueScope Steel go up and down completely randomly.

Pair Corralation between Gol Intelligent and BlueScope Steel

Assuming the 90 days trading horizon Gol Intelligent Airlines is expected to under-perform the BlueScope Steel. In addition to that, Gol Intelligent is 3.91 times more volatile than BlueScope Steel Limited. It trades about 0.0 of its total potential returns per unit of risk. BlueScope Steel Limited is currently generating about 0.03 per unit of volatility. If you would invest  964.00  in BlueScope Steel Limited on September 19, 2024 and sell it today you would earn a total of  236.00  from holding BlueScope Steel Limited or generate 24.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Gol Intelligent Airlines  vs.  BlueScope Steel Limited

Gol Intelligent Airlines

Risk-Adjusted Performance

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Very Weak

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

BlueScope Steel

Risk-Adjusted Performance

0 of 100

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 nearly stable basic indicators, BlueScope Steel is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Gol Intelligent and BlueScope Steel

The main advantage of trading using opposite Gol Intelligent and BlueScope Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gol Intelligent 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 Gol Intelligent Airlines 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.