Correlation Between Companhia Siderurgica and BlueScope Steel

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

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

Diversification Opportunities for Companhia Siderurgica and BlueScope Steel

0.51

Correlation Coefficient

Companhia Siderurgica  BlueScope Steel

Very weak diversification

The 3 months correlation between Companhia and BlueScope is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Companhia Siderurgica Nacional and BlueScope Steel Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlueScope Steel and Companhia Siderurgica 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 Companhia Siderurgica Nacional 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 Companhia Siderurgica i.e., Companhia Siderurgica and BlueScope Steel go up and down completely randomly.

Pair Corralation between Companhia Siderurgica and BlueScope Steel

Considering the 90-day investment horizon Companhia Siderurgica Nacional is expected to under-perform the BlueScope Steel. But the stock apears to be less risky and, when comparing its historical volatility, Companhia Siderurgica Nacional is 1.01 times less risky than BlueScope Steel. The stock trades about -0.39 of its potential returns per unit of risk. The BlueScope Steel Ltd is currently generating about -0.18 of returns per unit of risk over similar time horizon. If you would invest  7,252  in BlueScope Steel Ltd on September 27, 2024 and sell it today you would lose (952.00) from holding BlueScope Steel Ltd or give up 13.13% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Companhia Siderurgica Nacional  vs.  BlueScope Steel Ltd

Companhia Siderurgica

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Companhia Siderurgica Nacional 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 forward indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

BlueScope Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BlueScope Steel Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, BlueScope Steel is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Companhia Siderurgica and BlueScope Steel

The main advantage of trading using opposite Companhia Siderurgica and BlueScope Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Companhia Siderurgica 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 Companhia Siderurgica Nacional and BlueScope Steel Ltd 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.