Correlation Between United States and BlueScope Steel

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

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

Diversification Opportunities for United States and BlueScope Steel

0.4

Correlation Coefficient

United States  BlueScope Steel

Very weak diversification

The 3 months correlation between United and BlueScope is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel and BlueScope Steel Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlueScope Steel and United States 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 United States Steel 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 United States i.e., United States and BlueScope Steel go up and down completely randomly.

Pair Corralation between United States and BlueScope Steel

Assuming the 90 days trading horizon United States Steel is expected to generate 1.44 times more return on investment than BlueScope Steel. However, United States is 1.44 times more volatile than BlueScope Steel Limited. It trades about 0.07 of its potential returns per unit of risk. BlueScope Steel Limited is currently generating about 0.08 per unit of risk. If you would invest  3,391  in United States Steel on August 31, 2024 and sell it today you would earn a total of  411.00  from holding United States Steel or generate 12.12% return on investment over 90 days.

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

United States Steel  vs.  BlueScope Steel Limited

United States Steel

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in United States Steel are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, United States reported solid returns over the last few months and may actually be approaching a breakup point.

BlueScope Steel

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BlueScope Steel Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, BlueScope Steel may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with United States and BlueScope Steel

The main advantage of trading using opposite United States and BlueScope Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United States 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 United States Steel 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.

Check out your portfolio center.

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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.