Correlation Between Regal Investment and Bluescope Steel

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

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

Diversification Opportunities for Regal Investment and Bluescope Steel

0.46

Correlation Coefficient

Regal Investment  Bluescope Steel

Very weak diversification

The 3 months correlation between Regal and Bluescope is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Regal Investment and Bluescope Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bluescope Steel and Regal Investment 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 Regal Investment 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 Regal Investment i.e., Regal Investment and Bluescope Steel go up and down completely randomly.

Pair Corralation between Regal Investment and Bluescope Steel

Assuming the 90 days trading horizon Regal Investment is expected to generate 0.52 times more return on investment than Bluescope Steel. However, Regal Investment is 1.91 times less risky than Bluescope Steel. It trades about -0.03 of its potential returns per unit of risk. Bluescope Steel is currently generating about -0.03 per unit of risk. If you would invest  341.00  in Regal Investment on October 26, 2024 and sell it today you would lose (8.00) from holding Regal Investment or give up 2.35% of portfolio value over 90 days.

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

Regal Investment  vs.  Bluescope Steel

Regal Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Regal Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Regal Investment is not utilizing all of its potentials. The newest 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 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 Regal Investment and Bluescope Steel

The main advantage of trading using opposite Regal Investment and Bluescope Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Regal Investment 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 Regal Investment 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 Global Correlations module to find global opportunities by holding instruments from different markets.