Correlation Between H2O Retailing and BLUESCOPE STEEL

Can any of the company-specific risk be diversified away by investing in both H2O Retailing 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 H2O Retailing and BLUESCOPE STEEL into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between H2O Retailing and BLUESCOPE STEEL, you can compare the effects of market volatilities on H2O Retailing 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 H2O Retailing with a short position of BLUESCOPE STEEL. Check out your portfolio center. Please also check ongoing floating volatility patterns of H2O Retailing and BLUESCOPE STEEL.

Diversification Opportunities for H2O Retailing and BLUESCOPE STEEL

-0.22

Correlation Coefficient

H2O Retailing  BLUESCOPE STEEL

Very good diversification

The 3 months correlation between H2O and BLUESCOPE is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding H2O Retailing and BLUESCOPE STEEL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BLUESCOPE STEEL and H2O Retailing 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 H2O Retailing 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 H2O Retailing i.e., H2O Retailing and BLUESCOPE STEEL go up and down completely randomly.

Pair Corralation between H2O Retailing and BLUESCOPE STEEL

Assuming the 90 days horizon H2O Retailing is expected to generate 1.22 times more return on investment than BLUESCOPE STEEL. However, H2O Retailing is 1.22 times more volatile than BLUESCOPE STEEL. It trades about -0.01 of its potential returns per unit of risk. BLUESCOPE STEEL is currently generating about -0.01 per unit of risk. If you would invest  1,500  in H2O Retailing on October 4, 2024 and sell it today you would lose (120.00) from holding H2O Retailing or give up 8.0% of portfolio value over 90 days.

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

H2O Retailing  vs.  BLUESCOPE STEEL

H2O Retailing

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in H2O Retailing are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, H2O Retailing 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

Very 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 fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with H2O Retailing and BLUESCOPE STEEL

The main advantage of trading using opposite H2O Retailing and BLUESCOPE STEEL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if H2O Retailing 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 H2O Retailing 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.

Check out your portfolio center.

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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.