Correlation Between PT Steel and BC IRON

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

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

Diversification Opportunities for PT Steel and BC IRON

0.59

Correlation Coefficient

PT Steel  BC IRON

Very weak diversification

The 3 months correlation between S08 and BC3 is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding PT Steel Pipe and BC IRON in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BC IRON and PT Steel 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 PT Steel Pipe are associated (or correlated) with BC IRON. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BC IRON has no effect on the direction of PT Steel i.e., PT Steel and BC IRON go up and down completely randomly.

Pair Corralation between PT Steel and BC IRON

Assuming the 90 days horizon PT Steel Pipe is expected to generate 1.7 times more return on investment than BC IRON. However, PT Steel is 1.7 times more volatile than BC IRON. It trades about -0.03 of its potential returns per unit of risk. BC IRON is currently generating about -0.09 per unit of risk. If you would invest  1.35  in PT Steel Pipe on October 26, 2024 and sell it today you would lose (0.20) from holding PT Steel Pipe or give up 14.81% of portfolio value over 90 days.

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

PT Steel Pipe  vs.  BC IRON

PT Steel Pipe

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Steel Pipe has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

BC IRON

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BC IRON has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak 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 PT Steel and BC IRON

The main advantage of trading using opposite PT Steel and BC IRON positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PT Steel position performs unexpectedly, BC IRON 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 BC IRON will offset losses from the drop in BC IRON's long position.

The idea behind PT Steel Pipe and BC IRON 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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.