Correlation Between Ora Banda and Bluescope Steel

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

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

Diversification Opportunities for Ora Banda and Bluescope Steel

0.25

Correlation Coefficient

Ora Banda  Bluescope Steel

Modest diversification

The 3 months correlation between Ora and Bluescope is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Ora Banda Mining and Bluescope Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bluescope Steel and Ora Banda 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 Ora Banda Mining 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 Ora Banda i.e., Ora Banda and Bluescope Steel go up and down completely randomly.

Pair Corralation between Ora Banda and Bluescope Steel

Assuming the 90 days trading horizon Ora Banda Mining is expected to under-perform the Bluescope Steel. In addition to that, Ora Banda is 2.04 times more volatile than Bluescope Steel. It trades about -0.06 of its total potential returns per unit of risk. Bluescope Steel is currently generating about -0.03 per unit of volatility. If you would invest  2,119  in Bluescope Steel on October 26, 2024 and sell it today you would lose (106.00) from holding Bluescope Steel or give up 5.0% of portfolio value over 90 days.

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

Ora Banda Mining  vs.  Bluescope Steel

Ora Banda Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ora Banda Mining has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's primary 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.

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 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 Ora Banda and Bluescope Steel

The main advantage of trading using opposite Ora Banda and Bluescope Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ora Banda 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 Ora Banda Mining 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.