Correlation Between PICKN PAY and BlueScope Steel

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

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

Diversification Opportunities for PICKN PAY and BlueScope Steel

-0.38

Correlation Coefficient

PICKN PAY  BlueScope Steel

Very good diversification

The 3 months correlation between PICKN and BlueScope is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding PICKN PAY STORES and BlueScope Steel Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlueScope Steel and PICKN PAY 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 PICKN PAY STORES 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 PICKN PAY i.e., PICKN PAY and BlueScope Steel go up and down completely randomly.

Pair Corralation between PICKN PAY and BlueScope Steel

Assuming the 90 days trading horizon PICKN PAY STORES is expected to under-perform the BlueScope Steel. But the stock apears to be less risky and, when comparing its historical volatility, PICKN PAY STORES is 1.24 times less risky than BlueScope Steel. The stock trades about -0.1 of its potential returns per unit of risk. The BlueScope Steel Limited is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,314  in BlueScope Steel Limited on December 4, 2024 and sell it today you would earn a total of  146.00  from holding BlueScope Steel Limited or generate 11.11% return on investment over 90 days.

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

PICKN PAY STORES  vs.  BlueScope Steel Limited

PICKN PAY STORES

Risk-Adjusted Performance

Very Weak

Over the last 90 days PICKN PAY STORES has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

BlueScope Steel

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BlueScope Steel Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, BlueScope Steel reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PICKN PAY and BlueScope Steel

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